11. Income Taxes

For the years ended December 31, 2025 and 2024, the Company recorded tax provisions of zero. In addition, the Company has recorded a full valuation allowance against its net deferred tax assets as of December 31, 2025 and 2024.

The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, prospectively as of January 1, 2025. Income tax benefit attributable to loss from continuing operations for the year ended December 31, 2025 differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21% to pretax loss from continuing operations as a result of the following:

The Company accounts for income taxes in accordance with ASC Topic 740. Deferred income tax assets and liabilities are determined based upon temporary differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Deferred tax assets consisted of the following (in thousands):

For the years ended December 31, 2025 and 2024, the Company had U.S. federal net operating loss carryforwards of $46.1 million and $13.7 million and state net operating loss carryforwards of $15.1 million and $12.0 million, respectively. Federal losses have an indefinite carryforward period, but can only offset 80% of federal taxable income in a given year. Losses for state purposes begin to expire in 2043. For the years ended December 31, 2025 and 2024, the Company had federal research and development tax credit carryforwards of $8.0 million and $3.8 million, and state research and development tax credit carryforwards of $3.2 million and $1.6 million, respectively, which begin to expire in 2042 and 2037.

Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of capitalized research and development expenses, net operating loss carryforwards, and research and development tax credit carryforwards. Under the applicable accounting standards, management has considered the Company’s activity and concluded that it is more likely than not that the Company will not recognize the benefits of deferred tax assets. Accordingly, a full valuation allowance of $59.5 million as of December 31, 2025 and $30.2 million as of December 31, 2024, respectively, was recorded. Changes in valuation allowance for deferred tax assets for the years ended December 31, 2025 and 2024 related primarily to the increases in NOLs, research and development tax credit carryforwards, capitalized research and development expenses pursuant to IRC Section 174 and Section 59(e), and stock-based compensation were as follows:

The federal and state net operating loss and research and development credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986, and similar state provisions, due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and development credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. As of December 31, 2025, the Company has not completed a 382 study to assess whether a change of ownership has occurred since its formation.

Section 174 previously made by the Tax Cuts and Jobs Act of 2017 (the TCJA) for tax year beginning on or after Jan. 1, 2022, no longer permitted an immediate deduction for qualified research and development expenditures in the tax year that such costs are incurred. Section 174 costs were expenditures which represented research and development costs incidental to the development or improvement of a product, process, formula, invention, computer software or technique. Between January 1, 2022 and December 31, 2024, the research and experimental expenses under the Section 174 were required to be capitalized and amortized over five years for research performed in the U.S and fifteen years for research performed outside the U.S.

The One Big Beautiful Bill Act (“OBBBA") passed on July 4th, 2025, reinstated immediate expensing of research and development costs performed in the U.S. The Company has included the impact of the OBBBA in the provision, which results in a deferred tax asset of approximately $19.1 million as of December 31, 2025.

The Company adopted the authoritative guidance on accounting for and disclosure of uncertain tax positions, which requires the Company to determine whether a tax position of the Company is more likely than not to be sustained upon examination, including resolution of any related appeals of litigation processes, based on the technical merits of the position. For tax positions meeting the more likely than not threshold, the tax amount recognized in the financial statements is reduced by the largest benefit that has a greater than fifty percent likelihood of being realized upon the ultimate settlement with the relevant taxing authority. As of December 31, 2025, the Company had not recorded any reserves for uncertain tax positions or related interest and penalties. The Company’s policy is to record interest and penalties related to income taxes as part of the tax provision.

The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions in the United States, where applicable. There are currently no pending tax examinations. The Company is open to federal and state tax examination under statute from 2022 to present. Carryforward attributes from prior years can be adjusted upon examination by federal and state tax authorities to the extent utilized in an open tax year or in future periods.

There are no tax matters under discussion with taxing authorities that are expected to have a material effect on the Company’s consolidated financial statements.