|12 Months Ended|
Dec. 31, 2021
Note 7 - Income Taxes
The Company has accumulated net losses since inception and has not recorded an income tax provision or benefit during the years ended December 31, 2021 and 2020.
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:
The components of the net deferred tax asset as of December 31, 2021 and 2020 are the following (in thousands):
The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax asset will not be realized and, accordingly, has provided a full valuation allowance against its net deferred tax asset. A valuation allowance of approximately $51.5 million and $37.3 million was recorded for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, the Company had federal and state net operating loss carryforwards of approximately $143.6 million and $136.1 million, respectively. Approximately $112.6 million of the federal net operating loss carryforwards and $1.6 million of the state net operating loss carryforwards can be carried forward indefinitely. The remaining $31.2 million of federal and $134.5 million of state net operating loss carryforwards will begin to expire, if not utilized, by 2034 and 2034, respectively. The Company has $1.2 million of research and development credit carryforwards and $1.0 million of orphan drug credit carryforwards, which will begin to expire, if not utilized, by. Utilization of the net operating loss and credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended and similar state provisions.
There are no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC 740 “Income Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Company’s financial statements for the year ended December 31, 2021 and 2020. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.
Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the period ended December 31, 2021 and 2020. The Company would classify interest and penalties related to uncertain tax positions as income tax expense, if applicable.
The federal and state tax returns for the periods ended December 31, 2018, 2019 and 2020 are currently open for examination under the applicable federal and state income tax statues of limitations. The Company is currently under examination by the New York City Department Finance for the 2016, 2017 and 2018 tax years. While the outcomes of the examinations are unknown, the Company does not expect any material adjustments.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef