Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company had no income tax expense for the years ended December 31, 2023 and 2022. Due to uncertainties surrounding the realization of its deferred income tax assets in future periods, the Company has recorded a 100% valuation allowance against its net deferred income tax assets. If it is determined in the future that it is more likely than not that any deferred income tax assets are realizable, the valuation allowance will be reduced by the estimated net realizable amounts.
Years Ended December 31,
(in thousands) 2023
2022 (1)
Income tax benefit at federal statutory rate $ (4,584) $ (3,472)
Adjustments for tax effects of:
State income tax, net of federal benefit (1,191) (913)
Permanent adjustments 49  17 
Benefit state rate change (23) 646 
Other 152  877 
Share-based compensation 520  111 
Net operating loss write-off (574) 1,903 
Change in valuation allowance 5,659  831 
Income tax expense $ 8  $ — 
(1) The 2022 amounts presented in the table above have been reclassified to conform to the current year's presentation.
The tax effect of temporary differences and carryforwards that give rise to significant portions of the deferred income tax assets are as follows:
Years Ended December 31,
(in thousands) 2023 2022
Deferred income tax assets:
Net operating loss carryforwards $ 30,145  $ 26,574 
Share-based compensation 2,193  1,591 
Accrued expenses 319  349 
174 Capitalization 3,026  1,584 
Other 170  97 
35,853  30,195 
Less valuation allowance (35,815) (30,156)
Total deferred income tax assets 38  39 
Deferred tax liability - depreciation (38) (39)
Net deferred tax assets $ —  $ — 
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Generally, the ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which those temporary differences become deductible. Based on all relevant factors, a valuation allowance of $35.8 million has been established against deferred tax assets as of December 31, 2023 as management determined that it is more likely than not that sufficient taxable income will not be generated to realize those temporary differences.
At December 31, 2023, the Company had net operating loss carryforwards of approximately $120 million and $72 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The federal net operating loss carryforward began expiring in 2023, and the state net operating loss carryforward begins expiring in 2028. It is possible that the Company will not generate taxable income in time to use these net operating loss carryforwards before their expiration. In addition, under Section 382 of the Internal Revenue Code of 1986 (the “Code”), as amended, if a corporation undergoes an “ownership change” (as defined in the Code), the corporation’s ability to use its pre-change tax attributes to offset its post-change income may be limited. In general, an “ownership change” occurs if there is a cumulative change in a “loss corporation’s” (as defined in the Code) ownership by 5% shareholders that exceeds 50 percentage points over a rolling three-year period.
Management has evaluated the effect of guidance provided by GAAP regarding accounting for uncertainty in income taxes and determined the Company has no uncertain tax positions that could have a significant impact on its consolidated financial statements. The Company’s federal income tax return for 2020 and subsequent years remain open for examination.