Note 10 – Income Taxes

The Company’s provision for income taxes consists of the following for the years ended December 31, 2025 and 2024:

The Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows:

The difference between the Company’s expected income tax provision (benefit) from applying federal statutory tax rates to the pre-tax loss and actual income tax provision (benefit) relates to the effect of the following:

Management followed the guidance in ASC 740, which states that “a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome” and concluded that the Company’s net deferred tax assets were not realizable as of December 31, 2025 and 2024. Accordingly, a valuation allowance has been recorded to offset the net deferred tax assets in their entirety.

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the “change in valuation allowance” line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance:

The Company has federal NOL carryforwards of $288.1 million and $236.9 million at December 31, 2025 and 2024, respectively. The NOL carryforwards incurred prior to 2018 began expiring in 2022. In December 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”), most of the provisions of which took effect starting in 2018. Under the Tax Act, the amount of post 2017 NOLs that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the NOL deduction itself. In addition, the Tax Act generally eliminates the ability to carry back any NOL to prior taxable years, while allowing post 2017 unused NOLs to be carried forward indefinitely. Utilization of the NOL carryforwards may be subject to an annual limitation as provided by Section 382 of the Code, defined earlier. There can be no assurance that the NOL carryforwards will ever be fully utilized. To date, the Company has not performed a formal study to determine if any of its remaining NOL and credit attributes might be further limited due to the ownership change rules of Section 382 or Section 383 of the Code, as amended. The Company will continue to monitor this matter going forward. There can be no assurance that the NOL carryforwards will ever be fully utilized.

The Company has state NOL carryforwards of $51.4 million and $48.1 million at December 31, 2025 and 2024, respectively, which will begin to expire in 2029. The Company had foreign NOL carryforwards of $0 and $119.2 million at December 31, 2025 and 2024, respectively.

Management has evaluated all significant tax positions at December 31, 2025 and 2024 and concluded that there are no material uncertain tax positions. The Company would recognize both interest and penalties related to unrecognized benefits in income tax expense. The Company has not recorded any interest and penalties on any unrecognized tax benefits since its inception.

Tax years 2022 through 2024 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in Malaysia and the United States, as carryforward attributes generated in years past may still be adjusted upon examination by the Inland Revenue Board of Malaysia, the Internal Revenue Service (“IRS”) or state tax authorities. The Company is currently not under examination by the IRS or any other jurisdictions for any tax years.

The Tax Act amended IRC Section 174 to require capitalization of all research and development (“R&D”) costs incurred in tax years beginning after December 31, 2021. These costs are required to be amortized over five years if the R&D activities are performed in the U.S., or over 15 years if the activities were performed outside the U.S. The Company capitalized approximately $2.1 million of R&D expenses incurred as of December 31, 2025.