Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 14 – INCOME TAXES

The Company accounts for income taxes under ASC 740-10, which provides for an asset and liability approach of accounting for income taxes. Under this approach, deferred tax assets and liabilities are recognized based on anticipated future tax consequences, using currently enacted tax laws, attributed to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts calculated for income tax purposes. The Company’s tax jurisdictions are Florida and Pennsylvania.

The components of the Company's income tax rate for the years ended December 31, 2023 and 2022 are as follows:

	Year Ended December 31,
	2023			2022
U.S. federal statutory rate		21.0	%		21.0	%
Effects of:
State taxes, net of federal benefit		—	%		7.9	%
Stock-based compensation		(4.0	)%		(0.4	)%
Research and development expenses, net		(3.5	)%		(6.4	)%
Capitalized transaction costs		(9.8	)%		—	%
Loss on forward purchase agreement		13.7	%
Gain on loan forgiveness		—	%		(2.5	)%
Net operating loss true-up		—	%		2.6	%
Other		(3.8	)%		(0.2	)%
Valuation allowance		(13.6	)%		(22.0	)%
Effective rate		—	%		—	%

Significant components of the Company's deferred tax assets as of December 31, 2023 and 2022 are summarized below.

	December 31,
	2023			2022
Deferred income tax assets:
Net operating losses	$	8,775,098		$	7,642,000
Accrued interest		1,845,473			747,000
Federal research and development tax credits		68,106			113,000
Amortization of research expense		635,669			585,000
Right of use asset		4,676			29,000
Non-qualified deferred compensation		404,327			263,000
Accrued compensation		357,171			271,000
Change in fair value of forward purchase agreement		2,485,388			—
Capitalization of start-up costs		351,383
Accrual to cash and other		548,665			—
Change in fair value of earnout liability		(3,353,181	)
Change in fair value of derivative liabilities		—			275,000
Gross deferred tax asset		12,122,775			9,925,000
Valuation allowance		(12,122,775	)		(9,925,000	)
Net deferred income tax assets	$	—		$	—

As of December 31, 2023, the Company had approximately $31.3 million of federal and $30.9 million of state net operating loss carry forwards. Federal and state net operating loss carryforwards were approximately $25.7 million and $29.9 million, respectively, for the year ended December 31, 2022. The Company’s federal net operating loss carry forwards consist of approximately $8.2 million of pre 2018 net operating loss carryforwards, which expire after twenty years and begin to expire starting in 2028. The Company had approximately $23.1 million of post 2017 net operating losses that carry forward indefinitely. Future utilization of the net operating loss carry forwards is subject to certain limitations under Section 382 of the Internal Revenue Code. In addition, the Company has approximately $68,000 of federal research and development credit carryovers, which expire after twenty years and begin to expire starting in 2042. The Company utilized approximately $56,000 of such credits for tax year 2023. Future realization of the credit carry forwards is subject to certain limitations under Section 383 of the Internal Revenue Code. The Company has not undertaken any formal research and development credit study to calculate its credits.

The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a valuation allowance against the net deferred tax asset due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, we have not reflected any benefit of such deferred tax assets in the accompanying financial statements. Our net deferred tax asset and valuation allowance increased by approximately $2,198,000 and $2,323,000 for the years ended December 31, 2023 and 2022, respectively.

The Company is subject to U.S. federal income tax examinations by tax authorities for all tax years since inception due to unexpired net operating loss carryforwards originating in and after that year. The Company may be subject to income tax examinations for the various state taxing authorities which vary by jurisdiction.

The Company has evaluated its income tax positions and has determined that it does not have any uncertain tax positions. The Company will recognize interest and penalties related to any uncertain tax positions through its income tax expense.