Income Tax

12 Months Ended

Dec. 31, 2024

Income Tax

Income Tax

13.        Income Tax

The components of income tax benefit consisted of the following for the years ended December 31, 2024 and 2023:

	2024		2023
Current Benefit:
Federal	$	—	$	—
State		—		—
Foreign		—		—
		—		—
Deferred Benefit:
Federal		—		(521,420)
State		—		(49,700)
Foreign		—		—
Total	$	—	$	(571,120)

The differences between the company’s income tax benefit and the benefit computed at the 21% United States statutory income tax rate were as follows:

	2024		2023
Federal income tax benefit at statutory rate:	$	(7,208,800)	$	(8,620,900)
Increase (reduction) in income tax resulting from:
State income tax, net of federal benefit		(52,400)		(8,900)
Foreign tax rate differential		(7,100)		(2,200)
Nondeductible expenses		(102,400)		57,200
Stock based compensation		123,000		351,500
Change in state tax rate		(48,500)		358,000
Section 382 adjustment to tax attributes		5,155,400		—
Change in valuation allowance		1,452,900		8,159,000
Prior Period True-Ups		689,500		(288,400)
Other		(1,600)		(5,300)
Purchase Accounting Adjustment		—		(571,120)
Income tax benefit	$	—	$	(571,120)

The tax effects of temporary differences and operating loss carryforwards that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows at December 31, 2024 and 2023:

	2024		2023
Deferred tax assets:
Net operating loss carryforwards	$	31,759,300	$	28,914,050
R&D credit carryforwards		408,500		3,830,306
Stock based compensation		2,850,300		2,799,908
Lease liability		2,651,200		2,951,877
Deferred revenue		—		6,307
Capitalized Section 174 R&D costs		8,025,800		7,481,832
Net unrealized built-in losses (NUBIL) - Section 382		1,175,900		—
Other		378,500		319,826
Unrealized gains/losses		6,800		507,547
Deferred tax assets		47,256,300		46,811,653
Deferred tax liabilities:
Property, plant and equipment, primarily due to differences in depreciation		(665,200)		(738,290)
Right-of-use lease assets		(4,659,300)		(5,573,944)
Deferred tax liabilities		(5,324,500)		(6,312,234)
Valuation allowance		(41,931,800)		(40,499,419)
Net deferred tax assets (liabilities)	$	—	$	—

At December 31, 2024 and December 31, 2023, the Company evaluated all significant available positive and negative evidence, including the existence of losses in recent years and management’s forecast of future taxable income, and, as a result, determined it was more likely than not that federal, foreign, and state deferred tax assets, including benefits related to net operating loss carryforwards, would not be realized. Accordingly, the deferred tax assets have been fully offset by a valuation allowance of $41.9 milion and $40.5 million as of December 31, 2024 and 2023, respectively.

As of December 31, 2024, and 2023, the Company’s U.S. federal net operating loss (“NOL”) carryforwards were approximately $218.8 million and $197.0 million, respectively. However, due to Section 382 limitations, only $150.1 million of the NOLs are available to offset future taxable income. The entire $150.1 million of available federal net operating loss carryforwards were incurred after December 31, 2017 and therefore, will not expire. As of December 31, 2024, and 2023, the Company had state NOL carryforwards of approximately $125.6 million and $126.5 million, respectively. Due to Section 382 limitations, only $5.3 million of the state NOLs are available to offset future taxable income. The state net operating losses that are available to offset future taxable income begin to expire in 2039 if not utilized.

The Company’s ability to utilize its NOL and research and development (R&D) credit carryforwards may be substantially limited due to ownership changes that have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the Code), as well as similar state provisions. These ownership changes may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change,” as defined by Section 382 of the Code, results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain stockholders or public groups. The Company completed a Section 382 study during 2024, and it was determined that the Company has experienced one ownership change of over 50% since 2020, the year of the last 50 percent or greater ownership change. The 2024 ownership change occurred on August 19, 2024. Going forward, the utilization of loss carryforwards and tax credits generated before August 19, 2024 will be subject to an annual limitation. As a result of the ownership changes and limitations, $68.8 million of federal NOLs and $6.4 million of federal R&D credits will expire unutilized.

The Company has evaluated its tax positions to consider whether it has any unrecognized tax benefits. As of December 31, 2024, the Company had no unrecognized tax benefits. The Company does not anticipate a significant change in total unrecognized tax benefits or the Company’s effective tax rate due to the settlement of audits or the expiration of statutes of limitations within the next twelve months.

The following is a tabular reconciliation of the Company’s change in gross unrecognized tax positions during the years ended December 31, 2024 and 2023:

	2024		2023
Beginning balance	$	—	$	—
Gross increases for tax positions related to the acquisition of Elusys Therapeutics		—		1,480,974
Divestiture of equity interests in ElusysTherapeutics		—		(1,480,974)
Ending balance	$	—	$	—

The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions as of December 31, 2024 and 2023 that would impact the effective tax rate if recognized, and as such, no interest or penalties were recorded to income tax expense.

The Company has analyzed its filing positions in all significant federal, state, and foreign jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. With few exceptions, the Company is no longer subject to United States Federal, state, and local tax examinations by tax authorities for years before 2021, although carryforward attributes that were generated prior to 2021 may still be adjusted upon examination by the taxing authorities if they either have been or will be used in a future period. No income tax returns are currently under examination by taxing authorities.