Note 16. Income Taxes

We account for income taxes in accordance with ASC 740, which requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities,

and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets.

Effective July 1, 2025, we adopted ASU 2023-09 on a prospective basis, which enhances the transparency and decision usefulness of income tax disclosures in our financial statements. This update requires entities to disclose a detailed reconciliation of the federal statutory income tax rate to the effective tax rate and the disaggregation of income (loss) before income taxes, income tax benefit (expense) and income taxes paid, net of refunds by domestic federal, domestic state, and foreign jurisdictions. Furthermore, changes in unrecognized tax benefits must be categorized based on their relation to current or prior annual reporting periods.

We have not recorded an income tax provision for the fiscal years ended June 30, 2026 and 2025 due to our taxable losses offset with a full valuation allowance. All losses before income taxes were generated in the United States.

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. Due to our history of net losses, the deferred tax assets have been fully offset by a full valuation allowance of $91.4 million and $73.7 million as of June 30, 2026 and 2025, respectively. Our changes in the deferred tax asset valuation allowance for the years ended June 30, 2026 and 2025, were $17.7 million and $3.8 million, respectively.

We had federal and state net operating loss carryforwards of approximately $286.7 million and $51.8 million, respectively as of June 30, 2026 and federal and state net operating loss carryforwards of approximately $246.1 million and $23.8 million, respectively as of June 30, 2025. The federal net operating loss will carry forward indefinitely subject to an 80% taxable income limitation. The state net operating loss carryforwards will begin to expire in 2031 unless previously utilized.

Our ability to utilize our net operating loss carryforwards may be substantially limited due to ownership changes that have occurred or that could occur in the future under Section 382 of the Internal Revenue Code (Section 382) and similar state laws. A Section 382 study was completed through December 31, 2021, to analyze whether one or more ownership changes had occurred and determined that two such ownership changes did occur. We have not completed a Section 382 study through June 30, 2026. If an ownership change occurred our ability to utilize our net operating loss carryforwards and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes.

None of our prior income tax returns have been selected for examination by a major taxing jurisdiction; however, the statutes of limitations for various filings remain open. The oldest filings subject to potential examination for federal and state purposes are 2022 and 2021, respectively. If we utilize a net operating loss related to a closed tax year, the tax year in which the loss was incurred is subject to adjustment up to the amount of the net operating loss.

We have not reduced any tax benefit on our consolidated financial statements due to uncertain tax positions as of June 30, 2026 and we are not aware of any circumstance that would significantly change this result through the end of fiscal year 2027. To the extent we incur income-tax related penalties or interest, we will recognize them as additional income tax expense.