Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due. Deferred taxes relate to differences between the basis of assets and liabilities for financial and income tax reporting which will be either taxable or deductible when the assets or liabilities are recovered or settled.

The provision for income taxes consisted of the following:

For the years ended December 31, 2023 and 2022, the income (loss) before income taxes was $(344) and $(3,278), respectively. The Company had an effective tax rate of (11.92)% and (6.77)% for the years ended December 31, 2023 and 2022, respectively. The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate were as follows:

The table below presents the effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities as of December 31, 2023 and 2022:

The Company has Federal and State net operating loss (“NOLs”) carryforwards of approximately $1,683 and $1,941, respectively, as of December 31, 2023. The Federal NOLs were generated after December 31, 2017 and have an infinite carryforward period but are subject to 80% deduction limitation based upon pre-NOL deduction taxable income. State NOLs generated have various expiration rules and dates with the first amount of NOLs expiring in 2028.

The utilization of the Company’s net operating loss carryforwards and research tax credit carryovers could be subject to annual limitations under Section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and similar state tax provisions, due to ownership change limitations that may have occurred previously or that could occur in the future. These ownership changes limit the amount of net operating loss carryforwards and other deferred tax assets that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383 of the Code, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percent points over a three-year period. The Company has completed an analysis of an ownership change under Section 382 of the Code. The Section 382 analysis concluded that an ownership change occurred on November 12, 2021, the date of the Company’s IPO. The Company also determined that on the date of the ownership change it was reasonable to conclude that it was in a net unrealized built-in gain position. The Company did not do any work to determine what realized built-in gains were available to increase its Section 382 limitation each year. Based on the Section 382 analysis, the Company has plenty of cumulative base Section 382 limitation available to utilize pre-ownership change 2021 net operating losses in 2023 as well as all of its post-ownership change net operating losses, which are not limited under Section 382.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2023 and 2022.

There was income tax expense for the years ended December 31, 2023 and 2022 of $41 and $222, respectively.

Uncertain Tax Positions

As of December 31, 2023, the Company has three uncertain tax positions that total a gross amount of $2,448, which included an increase of $263, of which 80% is covered via NOLs. After the impact of NOLs, interest is immaterial. The Company expects to release its FIN 48 reserve as well as making corresponding adjustment to its NOLs in 2025.