v3.23.1
INCOME TAX
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAX INCOME TAXThe Company has no current or deferred tax expense due to its current year loss and its overall net operating loss position. A reconciliation of the federal statutory tax rate and the effective tax rates for the year ended December 31, 2022 and 2021 is as follows:    
December 31
20222021
Federal Tax at Statutory Rate21.00%21.00%
Permanent(6.25)%(0.69)%
Change in Valuation Allowance(21.73)%(26.13)%
True Ups(0.06)%—%
R&D Credit7.04%5.82%
Effective Tax Rate—%—%
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets were as follows:
December 31
20222021
Capitalized R&D Expenses$5,199,721 $3,002,819 
Other Deferred Items145,935 121,152 
Stock Compensation484,205 50,650 
Net Operating Loss - US3,919,323 1,931,959 
R&D Credits3,293,572 1,068,451 
Net deferred tax assets 13,042,756 6,175,031 
Valuation Allowance
(13,042,756)(6,175,031)
Net deferred tax assets (liabilities)$— $— 
The valuation allowance recorded by the Company as of December 31, 2022 and December 31, 2021 resulted from the uncertainties of the future utilization of deferred tax assets relating from NOL carry forwards for federal and state income tax purposes. Realization of the NOL carry forwards is contingent on future taxable earnings. The deferred tax asset was reviewed for expected utilization using a “more likely than not” approach by assessing the available positive and negative evidence surrounding its recoverability. Accordingly, a full valuation allowance continues to be recorded against the Company’s deferred tax asset, as it was determined based upon past and projected future losses that it was “more likely than not” that the Company’s deferred tax assets would not be realized. In future years, if the deferred tax assets are determined by management to be “more likely than not” to be realized, the recognized tax benefits relating to the reversal of the valuation allowance will be recorded. The Company will continue to assess and evaluate strategies that will enable the deferred tax asset, or portion thereof, to be utilized, and will reduce the valuation allowance appropriately as such time when it is determined that the “more likely than not” criteria is satisfied.
The federal net operating loss carryforwards of $18.6 million have an indefinite life, but the R&D credits of $3.2 million begin to expire in 2039. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carry forwards could be subject to annual limitations against taxable income in future periods, which could substantially limit the eventual utilization of such carry forwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carry forward is subject to any Internal Revenue Code Section 382 limitation. To the extent there is a limitation, there could be a reduction in the deferred tax asset with an offsetting reduction in the valuation allowance.
Tax positions taken or expected to be taken in the course of preparing the Company’s tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold, as well as accrued interest and penalties, if any, would be recorded as an interest and penalties expense in the current year. There were no uncertain tax positions that require accrual or disclosure to the financial statements as of December 31, 2022.
The Tax Cuts and Jobs Act of 2017 (TCJA) has modified the IRC 174 expenses related to research and development for the tax years beginning after December 31, 2021. Under the TCJA, the Company must now capitalize the expenditures related to research and development activities and amortize over five years for U.S. activities and 15 years for non-U.S. activities using a mid-year convention. Since this has been the Company's policy since 2019, the current year capitalization of research and development costs in accordance with IRC 174 was $13.4 million for a total accumulated gross amount of $24.7 million as of December 31, 2022.