Annual report [Section 13 and 15(d), not S-K Item 405]

Note 9 - Income Taxes

v3.26.1
Note 9 - Income Taxes
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

Note 9 — Income Taxes 

 

The Company has accumulated net losses since inception.  The Company recorded a minimal provision for the year ended December 31, 2025 and did not record an income tax provision or benefit during the year ended December 31, 2024.

 

The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis. As a result, the 2025 rate reconciliation is presented in accordance with the new disclosure requirements, while the 2024 reconciliation continues to be presented under the disclosure requirements in effect for that period.

 

A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:

 

   

For the year ended December 31,

  
   

2025

  
   

Amount

    

Percent

  

U.S. federal statutory tax rate

   $ (615 )     21 %

State and local income taxes, net of federal income tax effect(1)

     2       0 %

Tax credits

     (59 )     2 %

Change in valuation allowance

     (870 )     30 %

Non-deductible items

     22       -1 %

Other adjustments

                

Sale of subsidiary(2)

     1,522       -52 %

Provision for income taxes and effective income tax rate

   $ 2       0

%

 

  (1) During the year ended December 31, 2025, state taxes in Florida comprised greater than 50% of the tax effect in this category.
  (2) The sale of subsidiary is driven by the write-off of Baergic's tax attributes and other deferred tax assets due to the sale of the subsidiary in 2025.  There is an offsetting impact within the Change in valuation allowance as the deferred tax assets maintained a full valuation allowance.

 

A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate for the year ended December 31, 2024 is as follows:

 

   

For the year ended December 31,

 
   

2024

  

Statutory federal income tax rate

     21 %

State rate change

     (14 )%

Credits

     1 %

None-deductible items

     1 %

Return to provision

     (12 )%

Change in fair value of warrant liability

     (2 )%

Change in valuation allowance

     6 %

Income taxes provision (benefit)

     (0 )%

 

The components of the net deferred tax asset as of December 31, 2025 and 2024 are the following (in thousands):

 

   

As of December 31,

  
   

2025

    

2024

  

Deferred tax assets:

                

Net operating loss carryforwards

   $ 27,530     $ 27,114  

Stock compensation and other

     520       404  

In process research and development

     1,303       1,929  

Accruals and reserves

     38       3  

Section 174 capitalization

     2,143       2,536  

Tax credits

     3,043       2,995  

Other

     23       —  

Total deferred tax assets

     34,600       34,981  

Less: valuation allowance

     (34,600 )     (34,981 )

Deferred tax assets, net

   $ —     $ —  

 

The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax asset will not be realized and, accordingly, has provided a full valuation allowance against it. A valuation allowance of approximately $34.6 million and $35.0 million was recorded as of December 31, 2025 and 2024, respectively.

 

As of December 31, 2025, the Company had federal and state net operating loss carryforwards of approximately $88.7 million and $144.3 million, respectively. Approximately $74.3 million of the federal net operating loss carryforwards and $3.2 million of the state net operating loss carryforwards can be carried forward indefinitely. The remaining $14.5 million of federal and $141.1 million of state net operating loss carryforwards will begin to expire, if not utilized, by 2035 and 2037, respectively. The Company has $3.0 million of research and development credit carryforwards, which will begin to expire, if not utilized, in 2035. Utilization of the net operating loss and credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code. The Company has not performed a Section 382 analysis as of December 31, 2025.

 

There are no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC 740, which clarifies the accounting for uncertainty in income taxes recognized in the consolidated financial statements, that have been recorded on the Company's consolidated financial statements for the periods year ended December 31, 2025 and 2024.

 

Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the periods ended December 31, 2025 and 2024.

 

The Company is subject to U.S. federal and various state taxes. Because of net operating losses, all federal tax years since inception remain open for the assessment of income taxes.  The expiration of the statute of limitations related to the various state income and franchise tax returns varies by state.

 

    On July 4, 2025, President Donald J. Trump signed the “One Big Beautiful Bill Act” (OBBBA) into law. Key corporate tax provisions include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to interest limitation rules, and expanded aggregation requirements for compensation deductibility limits. In accordance with ASC 740, the Company recognized the effects of the new tax law in the period enacted. As a result, the Company immediately expensed current-year domestic research and experimental expenditures and elected to continue amortizing its existing domestic capitalized research and experimental expenditures over their remaining useful lives. Due to the Company having a full valuation allowance, there were no impacts to the effective tax rate.

 

 

Under ASC 2023- 09, entities must disclose income taxes paid (net of refunds received), disaggregated between federal and state. This also requires disclosing income taxes paid (net of refunds) by individual jurisdictions that represent more than 5% of total income taxes paid (net of refunds).

 

 

Because the company does not have significant payments for the year ended December 31, 2025, no amounts are disclosed.