NOTE 9 — INCOME TAXES

Net Operating Loss Carryforwards

The Company files income tax returns in the U.S. federal jurisdiction and in several states including, but not limited to, California, Colorado, and Oregon. The Company’s federal and state tax returns for the 2023 fiscal year and forward are subject to examination by taxing authorities. Federal and state laws impose substantial restrictions on the utilization of federal net operating loss (“NOL”) carryforwards in the event of an ownership change for income tax purposes, as defined in Section 382 of the Internal Revenue Code (“IRC”). Pursuant to IRC Section 382, annual use of the Company’s NOL carryforwards is limited whenever a cumulative change in ownership of more than 50% occurs within any rolling three-year period. During the fiscal year ended June 30, 2026, the Company completed an IRC Section 382 analysis and concluded that while the Company did not experience an IRC Section 382 ownership change for the year, the Company’s NOL carryforwards are still subject to limitations as a result of prior ownership changes. The Company had $248.9 million of U.S. federal NOL carryforwards as of June 30, 2026, of which $33.4 million will expire without any opportunity for utilization due to the limitations set forth in IRC Section 382. Our ability to use the remaining $215.5 million of U.S. federal NOL carryforwards is subject to strict limitations as a result of prior ownership changes.

As of June 30, 2026, the Company had the following NOL carryforwards, which if not utilized, will expire as follows (in thousands):

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It should be noted that with respect to $72.4 million of the $194.2 million of NOL carryforwards in the table above that do not expire, these NOLs are subject to more restrictive IRC Section 382 limitations, and as such will become available in varying annual amounts for an aggregate of approximately $6.6 million through fiscal year 2038, and $1.2 million annually thereafter. In addition, with respect to the $21.3 million of NOL carryforwards in the table above that expire beginning in 2031 through 2038 if not utilized, $11.3 million is currently available to offset taxable income and the remaining $10.0 million will become available through 2038. The Company’s state NOLs carryforwards are also expected to be subject to similar limitations as those imposed under IRC Section 382.

Income Tax Expense

For the fiscal years ended June 30, 2026 and 2025, the reconciliation between the income tax benefit computed by applying the statutory U.S. federal income tax rate to the pre-tax loss before income taxes, and total income tax expense recognized in the consolidated financial statements is as follows (in thousands):

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For the fiscal years ended June 30, 2026 and 2025, the Company did not recognize any current income tax expense or benefit due to a full valuation allowance on its net deferred income tax assets.

Deferred Income Tax Assets and Liabilities

As of June 30, 2026 and 2025, the income tax effects of temporary differences that give rise to significant deferred income tax assets and liabilities are as follows (in thousands):

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For the fiscal years ended June 30, 2026 and 2025, the valuation allowance increased by $22.0 million and $20.2 million, respectively, primarily as a result of an increase in net operating loss carryforwards and capitalization of research and experimental costs for income tax purposes. In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. Key elements of the Tax Cuts and Jobs Act of 2017 changed under the OBBBA, including options on how to account for domestic research or experimental

expenditures. FASB ASC 740, "Income Taxes", requires the effects of changes in tax rates and laws on tax balances to be recognized in the period in which the legislation is enacted. During the fiscal year ended June 30, 2026 the Company elected to capitalize and amortize its domestic research and experimental expenditures on a straight-line basis over no less than 60 months, beginning with the month in which the taxpayer first realizes benefits from those expenditures. The Company does not expect to realize benefits from these capitalized expenditures until it is able to commercialize its product candidates. The changes in the OBBBA did not have a material impact on the Company’s net deferred tax assets or the accompanying consolidated financial statements.

Unrecognized Tax Benefits

The Company did not have any unrecognized tax benefits as of June 30, 2026 and 2025. The Company’s policy is to account for any interest expense and penalties for unrecognized tax benefits as part of the income tax provision. The Company does not anticipate that unrecognized tax benefits will significantly increase or decrease within the next twelve months.