12. Income Taxes

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered such factors as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible. As of December 31, 2025 and 2024, the Company does not believe that it is more likely than not that the deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the Company’s balance sheets. During the years ended December 31, 2025 and 2024, the valuation allowance increased by $6.3 million and $11.3 million, respectively, which primarily relates to the current year operating loss and capitalized research and development expenses.

On July 4, 2025, new legislation (commonly known as the One Big Beautiful Bill Act or OBBBA) was enacted into law in the United States. The OBBBA includes numerous changes to existing tax law including extending or making permanent certain business and international tax measures initially established under the 2017 Tax Cuts and Jobs Act, which were set to expire. Additionally, the OBBBA permanently eliminates the requirement to capitalize and amortize U.S.-based research and development expenditures over five years and provides the option to make these expenditures fully deductible in the period incurred. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company does not expect the change to be material to the financial statements due to the Company’s full valuation allowance.

The Company believes that income tax filing positions will be sustained upon examination and does not anticipate any adjustments that would result in a material adverse effect on the Company’s financial position, results of operations or cash flows. Accordingly, the Company has not recorded any reserves, or related accruals or uncertain income tax positions as of December 31, 2025 and 2024.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company has no accruals for interest and penalties as of December 31, 2025 and 2024.

The Internal Revenue Code of 1986 contains certain provisions that can limit a taxpayer’s ability to utilize net operating loss (“NOL”) and tax credit carryforwards in any given year resulting from cumulative changes in ownership interests in excess of 50 percent over a three-year period (“ownership change”). In the event of such a deemed ownership change, Internal Revenue Code Section 382 (”Section 382”) imposes an annual limitation on pre-ownership change tax attributes. As of December 31, 2025, the Company has not performed a formal Section 382 study, however the Company has reviewed its temporary deductible differences in conjunction with its temporary taxable differences as a measure against its definite lived net operating losses and anticipates any impact would be immaterial.

As of December 31, 2025, the Company has federal NOL carryforwards of approximately $70.3 million, of which $1.5 million is subject to the 20-year carryforward period and begins to expire in 2036. The remaining federal NOL carryforward of $68.8 million has an indefinite carryforward period.

The Company has available state NOL carryforwards of approximately $41.7 million and $41.9 million as of December 31, 2025 and 2024, respectively. The state NOLs are expected to begin to expire in 2036, although not all states conform to the federal NOL carryforward period and occasionally limit the use of NOLs for a period of time.

As of December 31, 2025, the Company had federal research and development credits of approximately $4.9 million. The research and development credits, if not utilized, will begin to expire in 2036.

The Company is subject to taxation and files income tax returns in the U.S. Federal and state jurisdictions. The statute of limitations for assessment by the Internal Revenue Service and state tax authorities remains open from the tax years December 31, 2021 through December 31, 2025. There are currently no federal or state income tax audits in progress. The tax authorities generally have the ability to review income tax returns for periods where the statute of limitations has previously expired and can subsequently adjust the NOL carryforward or tax credit amounts.