v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Taxes [Abstract]  
Income Taxes

12.
Income Taxes
 
The effective tax rate for the years ended December 31, 2025 and 2024 was zero percent.
 
The tables below represent a reconciliation of the U.S. federal statutory income tax rate to effective tax rate. The Company has adopted the guidance in ASU 2023-09 on a prospective basis. The following table reflects the reconciliation rate for 2025 under the new guidance:
 
    2025
  
    Tax Expense
    Effective Rate
 
Income tax (benefit) provision at federal statutory rate
   $ (10,414 )     (21.0 )%
Change in valuation allowance
     4,594
       9.3
  
State income tax, net of federal income tax effect (1)
     3,357
       6.8
  
Tax credits
    (848 )     (1.7 )
Nontaxable or nondeductible items:
               
Nondeductible change in warrant liability fair value
     2,626
       5.3
  
Stock compensation
     264
       0.5
  
Other
     421
       0.8
  
Effective tax rate
   $ —       — %


(1)
North Carolina makes up the majority (greater than 50%) of the state income tax expense, net of federal income tax effect category.

The table below represents a reconciliation of the U.S. federal statutory income tax rate to effective tax rate for the year ended December 31, 2024 under the prior guidance.
 
   
2024
  
    Effective Rate
  
Income tax (benefit) provision at federal statutory rate
     (21.0 )%
Valuation allowance
     26.5
  
State income tax, net of federal benefit
     (4.9 )
Private Opus acquisition
     (11.2 )
Stock options
     0.8
  
Acquired IPR&D
     12.6
  
Research and development
     (1.6 )
Other
     (1.2 )
Effective tax rate
     — %


The components of income tax provision (benefit) consisted of the following for the years ended December 31, 2025 and 2024 (in thousands):

    2025
     2024
  
Loss before income taxes:
   $ (49,591
 )   $ (57,532 )
                 
Current:
                
Federal
   $ —     $ —  
State
     —       —  
Total current tax provision (benefit)
     —     $ —  
Deferred:
                
Federal
     —       —  
State
     —       —  
Total tax provision (benefit)
   $ —     $ —  

Significant components of the Company’s deferred tax assets and liabilities are summarized in the tables below as of December 31, 2025 and 2024 (in thousands):
 
   
2025
    
2024
  
Deferred tax assets:
            
Federal and state operating loss carryforwards
   $ 32,248     $ 20,342  
Acquired intangibles
     484      
547
  
Deferral of research and development costs
    1,451       9,582  
Organizational costs
     4      
5
  
Accruals and other
     329       77  
Stock-based compensation
     1,937      
2,035
  
Research and development credit carryforward
    2,911      
2,089
  
Transaction costs in connection with Opus Acquisition
     663       753  
Subtotal
     40,027      
35,430
  
Valuation allowance
    
(39,997
)
    
(35,403
)
Total deferred tax assets, net of valuation allowance
    
30
      
27
  
Deferred tax liabilities:
                
Fixed assets
    (30 )     (27 )
Total deferred tax liabilities
    
(30
)
    
(27
)
Net deferred tax assets
   $ —     $ —  

As of December 31, 2025 and 2024, the Company had gross deferred tax assets of approximately $40.0 million and $35.4 million, respectively. Realization of the deferred tax assets is primarily dependent upon future taxable income, if any, the amount and timing of which are uncertain. The Company has cumulative pre‑tax losses and faces significant challenges to becoming profitable in the future. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance of $40.0 million and $35.4 million as of December 31, 2025 and 2024, respectively. U.S. net deferred tax assets will continue to require a valuation allowance until the Company can demonstrate their realizability through sustained profitability or another source of income.

As of December 31, 2025 and 2024, the tax effect of the Company’s federal net operating loss carryforwards was approximately $31.5 million and $17.1 million, respectively. The Company had federal research credit carryforwards as of December 31, 2025 and 2024 of approximately $2.9 million and $2.1 million, respectively. The federal net operating loss carryforwards will not expire and the tax credit carryforwards will begin to expire in 2041 if not utilized.  As of December 31, 2025 and 2024, the Company had state net operating loss carryforwards with a tax effect of approximately $0.7 million and $3.3 million, respectively. The Company did not have any state research credit carryforwards as of December 31, 2025 and 2024. The state net operating loss carryforwards will begin to expire in 2028.
 
The Company did not utilize any tax carryforwards or credits during the years ended December 31, 2025 and 2024.

Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Generally, in addition to certain entity reorganizations, the limitation applies when one or more “5-percent shareholders” increase their ownership, in the aggregate, by more than 50 percentage points over a 3 year testing period, or beginning the day after the most recent ownership change, if shorter. The annual limitation may result in the expiration of net operating losses and credits before utilization.

As a result of the Opus Acquisition, the Company recorded $5.8 million in federal and state deferred tax assets, respectively, related largely to any net operating loss carryforwards and research development cost deferrals. The deferred tax assets acquired were fully offset by a valuation allowance. The Company has not yet evaluated the impact of Section 382 and Section 383 related to the Opus Acquisition.

As a result of the Merger with Rexhan, the Company recorded deferred tax assets of $10.3 million relating to net operating loss carryforwards which were fully offset by a valuation allowance. The $10.3 million net deferred tax assets recorded in relation to the Merger did not include federal and state net operating loss carryforwards that were estimated to expire under Internal Revenue Code Sections 382 as a result of the Merger. The Company has not yet evaluated the impact of Section 382 and Section 383 on its remaining tax attributes that were generated by Opus since the formation of the Company in 2018.


The Company recognizes interest and/or penalties related to uncertain tax positions in income tax expense. There were no uncertain tax positions as of December 31, 2025 and 2024, and as such, no interest or penalties were recorded to income tax expense.

The Company’s corporate returns are subject to examination beginning with the 2021 tax year for federal income tax purposes and 2020 for state income tax purposes.