13. Income Taxes

The components of loss before income taxes are as follows:

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The components of income tax (benefit) expense are as follows:

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The difference between the effective rate reflected in the provision (benefit) for income taxes on loss before taxes and the amounts determined by applying the applicable statutory U.S. tax rate are analyzed below:

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The Company’s deferred tax assets and liabilities consist of the following:

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As of December 31, 2021, the Company has federal and state net operating loss carryforwards of approximately $72.370 million and $51.930 million, respectively, to offset future federal and state taxable income. Federal NOL carryforwards as of December 31, 2017 totaling $46.054 million, and state NOL carryforwards as of December 31, 2021 totaling $49.894 million will expire at various dates through 2041 and state NOL carryovers as of December 31, 2021 of $2.037 million can be carried forward indefinitely but limited to offset 80% of taxable income. Federal NOL carryforwards generated during the years ended December 31, 2018 and forward totaling $26.316 million will carry forward indefinitely, but their utilization will be limited to 80% of taxable income. The Company has foreign net operating loss carryforwards of $9.405 million as of December 31, 2021, which can be carried forward indefinitely. As of December 31, 2021, the Company also has federal and state research and development tax credit carryforwards of approximately $2.456 million and $0.503 million, respectively, to offset future income taxes, which expire at various times through 2041. The federal and state net operating loss and research tax credit carryforwards may be subject to the limitations provided in the Internal Revenue Code (“IRC”) Sections 382 and 383. Approximately $0.639 million of the federal net operating loss attributable to Jade is subject to a Section 382 limitation. Jade’s carryover of its research and development credits will be subject to the Section 383 limitation.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES” Act) was enacted. The CARES Act included several income tax provisions including NOL carryback provisions and other tax benefits. The Company does not expect that the CARES Act will have a material impact on its income tax provision.

The Company files United States federal income tax returns and income tax returns in the Commonwealth of Massachusetts, California, North Carolina and Utah, as well as foreign tax returns for its subsidiaries in Austria and Australia. The Company filed all

foreign tax returns for its former French subsidiary EyeGate Pharma S.A.S., which was dissolved December 31, 2020. The Company is not under examination by any jurisdiction for any tax year.

The Company has recorded a valuation allowance against its United States deferred tax assets in each of the years ended December 31, 2021, and 2020 because the Company’s management believes that it is more likely than not that these assets will not be realized. The valuation allowance increased (decreased) by approximately $2.978 million and $(0.958) million during the years ended December 31, 2021 and 2020, respectively, primarily as a result of the increase in net operating losses and credits, adjustments for accrual to cash basis items, and capitalized research and development expenses.

As of December 31, 2021 and 2020, the Company had no unrecognized tax benefits or related interest and penalties accrued. The Company will recognize interest and penalties related to income taxes in income tax expense. The Company has not, as yet, conducted a study of R&D credit carryforwards, which are fully reserved for. This study may result in an adjustment to the Company’s R&D credit carryforwards and related valuation allowance, however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position.

The net operating loss and tax credit carryforwards are subject to review by the Internal Revenue Service in accordance with the provisions of Section 382 of the Internal Revenue Code. Under this Internal Revenue Code section, substantial changes in the Company’s ownership may limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset the Company’s taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of the Company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of the Company’s net operating loss carryforwards before they expire. The closing of the Company’s initial public offering, alone or together with transactions that have occurred or that may occur in the future, may trigger an ownership change pursuant to Section 382, which could limit the amount of research and development tax credit and net operating loss carryforwards that could be utilized annually in the future to offset the Company’s taxable income, if any. Any such limitation as the result of the Company’s additional sales of common stock by the Company could have a material adverse effect on the Company’s results of operations in future years.