v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

Note 11 – Income Taxes

 

The Company is subject to taxation in the United States, California and Australia. At December 31, 2025, the Company had federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $52,534,000, $52,345,000 and $5,006,000, respectively. The federal loss carryforwards generated after 2017 of approximately $51,929,000 will carryforward indefinitely and can be used to offset up to 80% of future annual taxable income, while those loss carryforwards generated prior to 2018 begin expiring in 2034, unless previously utilized. State loss carryforwards also begin expiring in 2034, unless previously utilized, while the Company’s foreign loss carryforward does not expire. The Company also has federal and California research and development credit carryforwards totaling approximately $573,000 and $1,194,000, respectively, at December 31, 2025. Additionally, the Company has a research orphan tax credit carryover totaling approximately $3,193,000 with a carryover period of 20 years. The Federal credits begin to expire in 2034, unless previously utilized, while the State credits do not expire. The Company also has foreign withholding tax carryforwards totaling $172,000 at December 31, 2025. The foreign withholding tax carryforward credit begins to expire in 2028, unless previously utilized.

 

The Company’s NOL and credit carryforwards to offset future taxable income may be subject to a substantial annual limitation as a result of ownership changes that could occur in the future pursuant to Internal Revenue Code Sections 382 and 383. These ownership changes may limit the amount of NOL and credit carryforwards that can be utilized to offset future taxable income and income tax, respectively. In general, an “ownership change” as defined by the tax code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percent of the outstanding stock of a company by certain stockholders or public groups.

 

The Company’s federal income tax returns from 2019 forward, state income tax returns from 2018 forward, and its Australian tax returns beginning in 2020 are subject to examination by tax authorities.

 

A reconciliation of the provision for income taxes to the amount computed by applying the statutory federal income tax rate to the loss from operations for the years ended December 31, 2025 and 2024 is as follows:

 

   Year Ended
December 31, 2025		   Year Ended
December 31, 2024		 
         
Expected income tax benefit computed at the statutory rate  $(8,236,924)  $(6,039,482)
State income tax benefit, net of federal benefit, net of valuation allowance   -    - 
Foreign rate differential   10,044    45,967 
Foreign losses not benefited   84,263    385,628 
Tax effect of:          
Change in valuation allowance   9,442,422    7,746,966 
Change in fair value of derivative liability   -    - 
Other permanent items and tax credits   (3,328,393)   (1,676,951)
Other non-deductible expenses   2,066,312    (421,091)
Provision for income taxes  $37,724   $41,037 

 

 

Net deferred tax assets are comprised of the following as of December 31, 2025 and 2024:

 

   December 31, 2025   December 31, 2024 
         
Net operating losses  $15,937,614   $6,708,668 
Foreign tax credits   172,102    139,978 
Federal & state research credit carryforwards   16,186    - 
Federal & state research credit carryforwards   4,959,544    2,530,635 
Stock-based compensation   1,128,104    775,253 
Amortization of capitalized research and development   3,027,057    5,599,397 
Depreciation   20,960    10,623 
Lease   29,672    - 
Valuation allowance   (25,291,239)   (15,764,554)
Net deferred tax assets  $-   $- 

 

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. Based on the weight of available evidence, including the Company’s history of operating losses, management has determined that it is more likely than not that the Company’s net deferred tax assets will not be realized. Accordingly, a valuation allowance has been established by the Company to fully offset these net deferred tax assets.

 

For the years ended December 31, 2025 and 2024, domestic and foreign pre-tax losses were as follow:

  

   December 31, 2025   December 31, 2024 
         
Loss before income taxes - Domestic  $29,101,560   $20,114,816 
Loss before income taxes – Foreign   299,329    1,542,510 
Loss before income taxes - Consolidated  $29,400,889   $21,657,326