The Company’s provision for income taxes is determined using the Company’s annual effective income tax rate. No income tax provision was recorded for the year ended December 31, 2025. For the year ended December 31, 2024, the Company recorded a federal income tax provision of $1.2 million and made an estimated income tax payment of $1.2 million. The primary difference in income tax expense for the year ended December 31, 2025, as compared to the prior year, is the result of recognition of license revenue for the year ended December 31, 2024 from the Company’s license agreements as discussed in Note 8, License agreements, which resulted in taxable income to the Company.

Based on available objective evidence during the year ended December 31, 2025, the Company believes it is more likely than not that its net deferred tax assets may not be realized. Accordingly, the Company has established a full valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. All losses to date have been incurred domestically.

The primary difference between the effective income tax rate and the statutory income tax rate relates to the Company’s change in valuation allowance against deferred taxes. The effective income tax rate of the Company’s provision for income taxes differed from the federal statutory rate as follows:

Deferred income taxes reflect the net tax effects: of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards. The tax effects of significant items comprising the Company’s deferred tax as of December 31, 2025 and 2024 are as follows:

ASC 740, Income Taxes, requires that the tax benefit of net operating losses, or NOLs, temporary differences, and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

The realization of deferred tax assets is dependent upon future earnings, if any, of which the timing and amount are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. During the years ended December 31, 2025 and 2024, the valuation allowance increased by $23.9 million and decreased by $5.1 million, respectively.

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 the Internal Revenue Code of 1986, as amended, or the Code, and similar state provisions. The Company prepared a Section 382 study which covered the period from inception through December 2025 and concluded that several ownership changes occurred since the inception of the Company. However, it was determined that the annual available NOLs under Section 382 will be sufficient to utilize in their entirety prior to their respective expiration years.

ASC Topic 740-10 prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected to be taken on a tax return. The Company had unrecognized tax benefits of $6.6 million and $6.8 million as of December 31, 2025 and 2024, respectively. The amount of unrecognized tax benefits is not expected to significantly change over the next twelve months. No amounts, outside of valuation allowance, would impact the effective tax rate on continuing operations. The beginning and ending gross unrecognized tax benefits amounts are as follows:

It is the Company’s policy to include penalties and interest expense related to income taxes as a component of income tax expense as necessary. Management determined that no accrual for interest and penalties was required as of December 31, 2025 and 2024. The Company’s tax jurisdictions are the United States (federal) and the states of California, Colorado, Georgia, Idaho, Maine, Massachusetts, New Hampshire, New York, New Jersey and Utah. The Company’s tax years from inception in 2017 forward remain open for examination by the federal and state authorities due to the carryover of unused net operating losses and tax credits. The Company is not currently subject to income tax examinations by any authority.

On July 4, 2025, the One Big Beautiful Bill Act, or the OBBBA, was signed into law in the United States. This comprehensive tax legislation contains a broad range of tax reforms, including provisions that allow for the immediate expensing of domestic research and development expenses, restore and make permanent 100% bonus depreciation for qualifying assets, and ease limitations on the deductibility of interest expense. The legislation has multiple effective dates, with certain provisions taking effect in 2025 and others being implemented through various future years. The Company has accounted for the provisions of the OBBBA in its financial statements. The changes did not impact income taxes due to its cumulative tax loss and tax effect of a full valuation allowance against those balances.