v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The components of the loss from continuing operations before provision for income taxes consists of the following (in thousands):
Years Ended December 31,
20252024
Domestic$(13,321)$(3,822)
Foreign(220)(230)
Loss before taxes$(13,541)$(4,052)

The difference between the provision (benefit) for income taxes and the amount computed by applying the U.S. federal income tax rate for the year ended December 31, 2025 is as follows (in thousands):
Years Ended December 31,
2025
Income taxes (benefit) at statutory rates$(2,844)21.0 %
State income tax (benefit), net of federal benefit (1)
75 (0.6)%
Foreign tax effects
Australia
Research credit984 (7.3)%
Change in Valuation Allowance(950)7.0 %
Other12 (0.1)%
Effect of changes in tax laws or rates enacted in the current period— — %
Tax credits
Research and development credit(732)5.4 %
Changes in valuation allowance(50)0.4 %
Nontaxable or nondeductible items
Permanent items865 (6.4)%
Officers' compensation475 (3.5)%
Stock compensation1,761 (13.0)%
Changes in unrecognized tax benefits71 (0.5)%
Other, net
Expiration of attributes229 (1.7)%
Other104 (0.7)%
$— 0.00 %
(1) The states that contributed to the majority (greater than 50%) of the tax effect in this category include California and Massachusetts.
As previously disclosed, prior to the adoption of ASU 2023-09, the difference between the provision (benefit) for income taxes and the amount computed by applying the U.S. federal income tax rate for the year ended December 31, 2024 is as follows:
2024
Federal income tax expense at statutory rate21.00 %
State income tax, net of federal benefit(3.75)%
State tax rate change29.65 %
Permanent differences(2.21)%
Research and development credit43.95 %
Stock compensation(5.49)%
Other(12.88)%
Change in valuation allowance(70.27)%
Effective income tax rate— %
During 2025, the Company identified an immaterial error in the Company’s deferred tax assets and corresponding valuation allowance as of December 31, 2024, relating to capitalized research and development costs which resulted in understated deferred tax assets and corresponding valuation allowance of approximately $0.9 million. For comparative purposes, the Company’s 2024 tax disclosures herein have been revised to reflect the adjustment to the deferred tax assets and valuation allowance. The Company evaluated the error and concluded the impact was not material to its consolidated financial statements. The effect of the revision to the net deferred tax asset balance was zero, and the revision had no impact on the Company’s consolidated balance sheet, consolidated statement of operations and comprehensive loss or consolidated statement of cash flows.
The major components of the Company’s deferred tax assets as of December 31, 2025 and 2024 are shown below (in thousands).
20252024
Deferred tax assets:
Net operating loss carryforwards$98,463 $85,686 
Research and development credit carryforwards12,357 12,767 
Capitalized research and development costs1,366 13,449 
Stock compensation674 3,570 
Other1,546 306 
Total deferred tax assets114,406 115,778 
Valuation allowance(113,743)(115,532)
Deferred tax assets, net of valuation allowance663 246 
Deferred tax liabilities:
Right-of-use assets(654)(246)
Other(9)— 
Total deferred tax liabilities(663)(246)
Net deferred tax assets (liabilities)$— $— 
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Under applicable accounting standards, management has considered the Company’s history of losses and concluded that it is more likely than not the Company will not recognize the benefits of federal and state deferred tax assets. Accordingly, a valuation allowance of $113.7 million and $115.5 million was established at December 31, 2025 and 2024, respectively, to offset the net deferred tax assets. When and if management determines that it is more likely than not that the Company will be able to utilize the deferred tax assets prior to their expiration, the valuation allowance may be reduced or eliminated. The valuation allowance decreased by approximately $1.8 million for the year ended December 31, 2025.
At December 31, 2025, the Company had federal, state and Australian net operating loss carryforwards of $369.4 million, $305.9 million, and $2.4 million, respectively, some of which will begin expiring in 2026 unless previously utilized. Included in the federal net operating loss carryforward is $195.8 of federal carryforward with no expiration date. The Australian losses may be carried forward indefinitely as well.
The Company also had federal and state research and development credit carryforwards of $13.3 million and $2.7 million, respectively. The federal research and development credit carryforwards will begin expiring in 2027, unless previously utilized. The state research credits begin to expire in 2027, unless previously utilized. Included in the state research credit carryforward is $0.6 million of carryforward with no expiration date. The Australian credits may be carried forward indefinitely as well.
Future utilization of the Company's net operating loss and research and development credit carryforwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code (IRC) Section 382 and 383, as a result of ownership changes that may have occurred or that could occur in the future. An ownership change occurs when a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards. If a change in ownership were to have occurred or occurs in the future, the use of NOL and tax credits carryforwards may be limited or reduced. The Company does not expect this analysis to be completed within the next 12 months. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company's effective tax rate.
The Company accounts for income taxes in accordance with authoritative accounting guidance which states the impact of an uncertain income tax position is recognized at the largest amount that is "more likely than not" to be sustained upon audit by the relevant taxing authority. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained.
A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows (in thousands):
Years Ended December 31,
20252024
Beginning balance uncertain tax benefits$3,067 $2,761 
Decreases related to prior year positions— (31)
Additions related to prior year positions59 — 
Additions related to current year positions65 337 
Decreases related to settlements with taxing authorities— — 
Decreases as a result of a lapse of the applicable statute of limitations— — 
Ending balance of unrecognized tax benefits$3,191 $3,067 
Included in the balance of uncertain tax benefits at December 31, 2025 and 2024 are $3.1 million and $2.9 million of tax benefits that, if recognized, would result in a reduction of the gross deferred tax asset, offset fully by valuation allowance and have no net impact on the financial statements.
The Company's policy is to record estimated interest and penalties related to uncertain tax benefits as income tax expense. As of December 31, 2025 and 2024, the Company had no accrued interest or penalties recorded related to uncertain tax positions.
The tax years 2021 through 2024 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the U.S. The statute of limitations for U.S. net operating losses utilized in future years will remain open beginning in the year of utilization. There are currently no pending income tax examinations.
On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was signed into law. The Act reinstates and makes permanent 100% first-year bonus depreciation under Section 168(k) for qualified property acquired and placed in service after January 19, 2025. Additionally, the Act allows current expensing of domestic research and experimental costs starting in 2025 and provides special retroactive relief for "smaller business taxpayers." The Company deducted the unamortized R&E expenditures as of December 31, 2024 on its 2024 tax return, resulting in no change in the Company's effective tax rate or cash tax liability due to the full valuation allowance. The Company has reflected the effects of the Act in its income tax provision in accordance with ASC 740 and there was no material impact.