INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

No provision for federal and state income tax expense has been recorded for the years ended December 31, 2022 and 2021 due to the valuation allowance recorded against the net deferred tax asset and recurring losses.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and deferred tax liabilities are as follows:

	December 31,
	2022		2021
Domestic tax loss and contribution carryforwards	$	21,419,800	$	18,656,500
Foreign tax loss carryforwards	4,531,900		5,134,700
Tax credits	3,718,100		2,534,600
Share-based compensation	3,908,000		3,647,100
Intangible assets	2,957,100		3,096,800
Accrued expenses	114,300		371,200
Section 174 - capitalized research and development	5,940,400		—
Research and development expenses	—		20,500
Other	19,200		5,900
Valuation allowance	(42,608,800)		(33,467,300)
Total deferred tax assets, noncurrent	$	—	$	—

The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. During the years ended December 31, 2022 and 2021, the valuation allowance increased by $9,764,900 and $6,265,600, respectively.

The reasons for the difference between actual income tax expense (benefit) for the years ended December 31, 2022 and 2021, and the amount computed by applying the statutory federal income tax rate to losses before income tax (benefit) are as follows:

	2022				2021
	Amount		% of Pretax Earnings		Amount		% of Pretax Earnings
Income tax benefit at statutory rate	$	(9,190,900)	21.0	%	$	(7,726,800)	21.0	%
State income taxes, net of federal tax benefit	(41,000)		0.1	%	(27,900)		0.1	%
Non-deductible expenses	314,900		(0.7)	%	4,500		—	%
Credits	(1,210,000)		2.7	%	(1,176,500)		3.2	%
Foreign rate differential	3,100		—	%	2,400		—	%
Change in state tax rate	(8,500)		—	%	1,764,100		(4.8)	%
Other	367,500		(0.8)	%	894,600		(2.5)	%
Change in valuation allowance	9,764,900		(22.3)	%	6,265,600		(17.0)	%
Income tax benefit	$	—	—	%	$	—	—	%

As of December 31, 2022, the Company had net operating loss carryforwards for federal, state and foreign income tax purposes of $101.8 million, $102.1 million and $19.7 million respectively. Federal loss carryforwards of $3.6 million begin to expire in 2034 and $98.3 million of the federal losses carryforward indefinitely. The state loss carryforwards of $102.0 million begin to expire in 2029 and $0.1 million carryforward indefinitely. Foreign net operating losses carry forward indefinitely, and may be subject to limitation. As of December 31, 2022, the Company had contribution carryforwards of $10,300, which begin to expire in 2023. In addition, as of December 31, 2022, the Company has federal research and development credits of $3.7 million which begin to expire in 2038. Starting in 2022, the Company has federal capital loss carryforwards of $33,100, which carryforward indefinitely for foreign tax purposes.

The Company acquired a subsidiary in Israel during the year ended December 31, 2020. However, the subsidiary has a history of book losses and as such, has no undistributed earnings.

The Tax Cuts and Jobs Act subjects a US shareholder to tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to either recognized deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax

is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred. The Company has a GILTI inclusion in 2022 and 2021 and an overall net operating loss; therefore, no GILTI tax has been recorded for the years ended December 31, 2022 and 2021.

The Internal Revenue Code of 1986, as amended, contains provisions which limit the ability to utilize the net operating loss and tax credit carryforwards in the case of certain events, including significant changes in ownership interests. If the Company’s net operating loss and tax credit carryforwards are limited, and the Company has taxable income which exceeds the permissible yearly net operating loss and tax credit carryforwards, the Company would incur a federal income tax liability even though net operating loss and tax credit carryforwards would be available in future years.

As of December 31, 2022 and 2021, the Company had no unrecognized tax benefits and does not anticipate a significant change in total unrecognized tax benefits within the next 12 months.

The Company is subject to United States federal income tax and income tax in multiple state jurisdictions. The Company has analyzed its filing positions in all federal and state jurisdictions where it is required to file income tax returns, as well as open tax years in these jurisdictions. The Company is subject to United States federal, state and local tax examinations by tax authorities for all years of operation. No income tax returns are under examination by taxing authorities at this time.

The Company’s policy for recording interest and penalties is to record them as a component of interest expense and general and administrative expenses, respectively. During December 31, 2022 and 2021, the Company did not record any interest and penalties related to uncertain tax positions.