Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of loss before income taxes are as follows:
Year Ended December 31,
2023 2022
Domestic $ (9,384,178) $ (10,563,302)
Foreign (3,039,399) (3,133,318)
Total Loss Before Income Taxes $ (12,423,577) $ (13,696,620)

The components of income tax expense (benefit) are as follows:
Year Ended December 31,
2023 2022
Deferred Taxes:
Federal $ (280,954) $ 4,954 
State 371,273  (117,964)
Total Deferred Taxes $ 90,319  $ (113,010)
Income Tax Expense (Benefit) $ 90,319  $ (113,010)

The difference between the effective rate reflected in the provision for income taxes and the amounts determined by applying the applicable statutory U.S. tax rate are analyzed below:
Year Ended December 31,
2023 2022
United States Federal Income Tax Rate 21.00  % 21.00  %
State Taxes, Net of Federal Benefit 13.26  (2.59)
Non-deductible R&D Expenses (3.49) — 
Contingent Consideration (3.36) — 
GILTI Inclusion (1.12) — 
Other Permanent Differences (0.65) (9.24)
Change in Valuation Allowance (27.61) (9.53)
Research and Development Credits 0.24  0.58 
Tax Rate Differential 0.32  2.89 
True Up Credit (0.08) — 
Other 0.76  (0.26)
Effective Tax Rate Expense (0.73) % 2.85  %
The Company’s deferred tax assets and liabilities consist of the following:
Year Ended December 31,
2023 2022
Net Deferred Tax Liability:
Net Operating Loss Carryforwards $ 25,982,646  $ 22,809,667 
Research and Development Credit Carryforwards 2,955,627  2,925,890 
Capitalized Research and Development 4,743,068  4,606,902 
Stock-Based Compensation 784,366  782,355 
Cash Versus Accrual Adjustments 77,729  336,360 
Total Deferred Tax Assets 34,543,436  31,461,174 
Valuation Allowance (33,025,829) (29,593,286)
Net Deferred Tax Asset 1,517,607  1,867,888 
Depreciation and Amortization —  (477)
In-Process Research and Development (2,297,047) (2,556,532)
Net Deferred Tax Liability $ (779,440) $ (689,121)
As of December 31, 2023, the Company has federal and state net operating loss carryforwards of approximately $90.2 million and $63.6 million, respectively, to offset future federal and state taxable income. Federal NOL carryforwards generated during the years ended December 31, 2017 and prior totaling $46.1 million will expire at various dates through 2037, and state NOL carryforwards totaling $63.6 million will expire at various dates through 2042. Federal NOL carryforwards generated during the years ended December 31, 2018 and forward totaling $44.1 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 $12.2 million as of December 31, 2023, which can be carried forward indefinitely. As of December 31, 2023, the Company also has federal and state research and development tax credit carryforwards of approximately $2.5 million and $0.5 million, respectively, to offset future income taxes, which expire at various times through 2042. 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 $0.6 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.
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 is not under examination by any jurisdiction for any tax year.
The Company has recorded a valuation allowance against its United States and foreign deferred tax assets in each of the years ended December 31, 2023, and 2022 because the Company’s management believes that it is more likely than not that these assets will not be realized. The valuation allowance increased by approximately $3.4 million and $1.3 million during the years ended December 31, 2023 and 2022, 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, 2023 and 2022, 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.