Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

14.Income Taxes

The components of loss before income taxes by U.S. and foreign jurisdictions are as follows (in thousands):

	Year Ended December 31,
	2025			2024
Loss before income tax:
United States	$	(104,428	)	$	(79,989	)
Foreign		-			(438	)
Total	$	(104,428	)	$	(80,427	)

The expense (benefit) for income taxes for the years ended December 31, 2025 and 2024 are as follows (in thousands):

	Year Ended December 31,
	2025			2024
Current expense (benefit):
Federal	$	-		$	-
State		-			-
Foreign		-			-
Total current expense (benefit)		-			-
Deferred benefit:
Federal		(420	)		-
State		(373	)		(2,097	)
Foreign		-			-
Total deferred income tax benefit:		(793	)		(2,097	)
Total income tax benefit:	$	(793	)	$	(2,097	)

As further described in Note 2, Summary of Significant Accounting Policies, the Company has elected to prospectively adopt the guidance in Topic 740. The following table is a reconciliation of the U.S. federal statutory rate to the Company’s effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09 (in thousands):

	December 31, 2025
Income tax at U.S. statutory rate	$	(21,930	)	21.1	%
State income taxes, net of federal benefit1		(373	)	0.4	%
Foreign tax effects		-		-
Tax credits:
U.S. federal R&D tax credits		(2,867	)	2.7	%
Change in valuation allowance		19,086		(18.4	)%
Nontaxable or nondeductible items:
Share-based compensation		1,185		(1.1	)%
Net operating loss expirations		3,752		(3.6	)%
Other		202		(0.2	)%
Changes in unrecognized tax benefits		152		(0.1	)%
Total	$	(793	)	0.8	%

1. State taxes in California made up the majority (greater than 50%) of this category.

The following table is a reconciliation of the U.S. federal statutory rate to the Company’s effective income tax for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 (in thousands):

	December 31, 2024
Income tax at U.S. statutory rate	$	(16,890	)
State income taxes, net of federal benefit		(1,895	)
Change in valuation allowance		11,517
Impairment		5,053
Tax credits		(1,344	)
Share-based compensation		1,684
Other		(222	)
Income tax benefit	$	(2,097	)
Effective income tax rate		2.6	%

Income taxes paid (net of refunds received) included the following (in thousands):

	Year Ended December 31, 2025
U.S. federal	$	-
U.S. state		15
Foreign		15
	$	30

The significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

	December 31, 2025			December 31, 2024
Deferred tax assets:
Net operating loss carryforwards	$	31,063		$	35,307
Share-based compensation		2,079			1,442
Tax credits		4,912			2,198
Accruals and reserves		2,076			1,688
Lease liability		343			372
Capitalized research and development costs		21,662			9,824
Deferred Income		5,601			-
Other		1			3
Total deferred tax assets		67,737			50,834
Valuation allowance		(60,364	)		(41,830	)
Net deferred tax assets		7,373			9,004
Deferred tax liabilities:
Property and equipment		(339	)		(271	)
Intangibles		(8,420	)		(10,893	)
Right-of-use asset		(316	)		(335	)
Total deferred tax liabilities		(9,075	)		(11,499	)
Net deferred tax liabilities	$	(1,702	)	$	(2,495	)

The Company’s Australian subsidiary had an accumulated deficit at December 31, 2025, and, accordingly, no provision has been provided thereon for any unremitted earnings.

The future realization of the tax benefits from existing temporary differences, net operating loss carryforwards and other tax attributes ultimately depends on the existence of sufficient taxable income within the carryforward period. Therefore, at each balance sheet reporting date, the Company assesses the realizability of its deferred tax assets whether it is more likely than not that some portion or all its deferred tax assets will not be realized. In assessing the realizability of its deferred tax assets, the Company considers all available evidence, both positive and negative, including results of operations in recent years, projected future taxable income, expected reversal of existing deferred tax liabilities, and tax planning strategies in making its assessment. After considering all available evidence, the Company has determined that it is more likely than not that its net deferred tax assets will not be realized in the foreseeable future. Therefore, the Company continues to maintain a valuation allowance against its net deferred tax assets as of December 31, 2025.

The Company maintained a full valuation allowance against its U.S. net deferred tax assets as of December 31, 2025 and 2024 with the exception of deferred tax liabilities that are indefinite-lived and are not able to be used as a source of income. The valuation increased by $18.5 million and $11.9 million during the years ended December 31, 2025 and 2024, respectively. The change in the valuation allowance for the year ended December 31, 2025 is primarily attributable to the capitalization of research and development costs. The change in the valuation allowance for the year ended December 31, 2024 is primarily attributable to net operating losses generated and the capitalization of research and development costs.

As of December 31, 2025, the Company has U.S. federal net operating loss carryforwards of $139.3 million which includes $89.6 million that have an unlimited carryforward period and $49.7 million that expire at various dates between 2026 and 2037. As of December 31, 2025, the Company has various state net operating loss carryforwards of $34.2 million that expire at various dates between 2033 and 2044.

As of December 31, 2025, the Company has U.S. federal research and development credits of $6.0 million that expire at various dates between 2035 and 2045, and state research and development credits of $0.1 million that begin to expire between 2036 and 2038.

The future realization of the Company’s net operating loss carryforwards and other tax attributes may be limited by the change in ownership rules under the U.S. Internal Revenue Code Section 382. Under Section 382, if a corporation undergoes an ownership change, the Company’s ability to utilize its net operating loss carryforwards and other tax attributes to offset income may be subject to an annual limitation. As of December 31, 2025, the Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes.

A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows (in thousands):

	December 31, 2025		December 31, 2024
Beginning balance	$	526	$	-
Increases related to prior year tax positions		152		224
Increases related to current year tax positions		519		302
Ending balance	$	1,197	$	526

As of December 31, 2025 and 2024, the Company had gross unrecognized tax benefits of approximately $1.2 million and $0.5 million, respectively. The unrecognized tax benefits would give rise to additional deferred tax assets if recognized. This would also give rise to a corresponding increase in the valuation allowance and would not impact the Company’s effective tax rate. The Company did not accrue interest or penalties related to unrecognized tax benefits as they relate to unutilized tax attributes.

The Company files income tax returns in the U.S., including various states, and jurisdictions outside the U.S. Therefore, the Company is subject to tax examination by various taxing authorities. The Company is not currently under examination and is not aware of any issues under review that could result in significant payments, accruals or material deviation from its tax positions. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by local tax authorities to the extent such tax attribute is utilized in a future period. As of December 31, 2025, the tax years from 2021 to present remain open to examination by the various U.S. taxing authorities. However, to the extent the Company utilizes net operating losses from years prior to 2021, the statute remains open to the extent of the net operating losses or other credits that are utilized.