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

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 15 – INCOME TAXES

 

Income tax expense for each of the following years consists of the following (in thousands):

 

    2025     2024  
    For the year ended December 31,  
    2025     2024  
             
Current:                
U.S. federal   $ 100     $ —  
State and local     —       —  
Total current income tax expense     100       —  
                 
Deferred:                
U.S. federal     —       —  
State and local     —       —  
Total deferred income tax expense     —       —  
                 
Total income tax expense   $ 100     $ —  

 

A reconciliation of the income tax expense the amount computed by applying the 21% statutory U.S federal income tax rate to income before income taxes after the adoption of ASU 2023-09 as follows:

 

In thousands except for percentages   Amount     Percent  
    For the year ended December 31, 2025  
In thousands except for percentages   Amount     Percent  
             
US federal statutory tax rate   $ 14,970       21.0 %
State and local income taxes, net of federal income tax effect (a)     —       0.0 %
Tax credits                
Research and development (“R&D”) credit     (2,882 )     (4.0 )%
R&D credit expired (under statute or 382 study)     3,327       4.6 %
Changes in valuation allowance     (36,054 )     (50.6 )%
Nontaxable or nondeductible items                
Change in FV of warrant liabilities     (1,289 )     (1.8 )%
Other     141       0.2 %
Other adjustments                
Federal NOL’s expired (under statute or 382 limitation)     20,284       28.5 %
Share-based awards     984       1.4 %
Other     619       0.8 %
Total income tax expense   $ 100       0.1 %

 

(a) State taxes in New York made up the majority (greater than 50 percent) of the tax effect in this category.

 

No federal, state and local income taxes were paid during the period.

 

 

Changes to US tax law enacted on July 4, 2025, allow for immediate expensing of domestic research and experimentation costs, accelerated depreciation on eligible capital expenditures, and other tax law changes impacting 2025 with certain changes effective in 2026. These changes are reflected in our results for the year ended December 31, 2025.

 

As previously disclosed for the year ended December 31, 2024, prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and federal statutory rate (in thousands):

 

    For the year ended December 31, 2024  
       
Income taxes at U.S. statutory rate   $ (13,384 )
State tax, net of federal benefit     (679 )
Research and development credit     (1,535 )
Deferred true ups     8,032  
Valuation allowance     5,418  
Change in fair value of warrant liabilities     159  
Expired tax losses and credits     2,116  
Permanent differences     (127 )
Total tax expense   $ —  

 

Deferred taxes are provided for the temporary differences between the financial reporting bases and the tax bases of the Company’s assets and liabilities. The temporary differences that give rise to deferred tax assets and liabilities were as follows (in thousands):

 

    2025     2024  
    For the year ended December 31,  
    2025     2024  
             
Deferred tax assets:                
Net operating loss carryforwards   $ 65,956     $ 88,059  
General business credit carryforwards     5,228       6,000  
State credits     77       2,780  
Property and equipment     —       1,002  
Stock based compensation     2,542       2,463  
Intangible assets     652       661  
Accrual to cash conversion     892       —  
Accruals     —       107  
Capitalized research and development     770       13,264  
Operating lease liabilities     318       —  
Other     91       70  
Deferred tax assets before valuation allowance     76,526       114,406  
Valuation allowance     (74,922 )     (114,406 )
Total deferred tax assets     1,604       —  
Deferred tax liabilities:                
Property and equipment     (1,333 )     —  
Right-of-use asset     (271 )     —  
Total deferred tax liabilities     (1,604 )     —  
Net deferred tax asset (liability)   $ —     $ —  

 

Net operating Loss and Other Carryforwards

 

As of December 31, 2025, the Company had $310.7 million of U.S. federal net operating loss (“NOL”) carryforwards, $11.6 million of state NOL carryforwards, $5.2 million of general business credit carryforwards, and $0.1 million of state credits. Of the federal NOLs, $308.1 million do not expire and may be carried forward indefinitely, subject to the limitation that they may offset no more than 80% of taxable income in any tax year. The remaining federal NOLs expire between 2026 and 2037. State NOL carryforwards have expiration periods that vary by jurisdiction based on applicable state tax laws. The federal general business credits begin to expire in 2043, and the state credits expire in 2026.

 

 

The utilization of NOLs and tax credits that have expiration dates will depend on the Company’s ability to generate sufficient taxable income before those attributes expire.

 

The Internal Revenue Code of 1986, as amended, includes provisions that may limit the Company’s ability to utilize its NOLs carryforwards following certain events, including significant changes in ownership. If such limitations apply and the Company generates taxable income in excess of the annually permitted NOL utilization, the Company could incur federal income tax liabilities even though additional NOLs would remain available for use in future years.

 

During the year ended December 31, 2025, the Company completed a Section 382 study to evaluate whether historical equity transactions resulted in an ownership change within the meaning of Section 382 of the Internal Revenue Code. Based on this analysis, the Company determined that there were numerous ownership changes. As a result, certain NOL carryforwards will not be realizable due to the Section 382 limitations.

 

The Company had previously recorded a full valuation allowance against the deferred tax assets associated with these NOLs. Accordingly, the $96.6 million reduction in gross deferred tax assets resulting from the Section 382 analysis was fully offset by a corresponding reduction in the valuation allowance and did not affect income tax expense or net income for the year ended December 31, 2025.

 

Valuation Allowance

 

At December 31, 2025 and 2024, the Company maintained a full valuation allowance on its deferred tax assets based on a history of cumulative losses. The Company will not record income tax benefits in the financial statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets. In 2025, the valuation allowance decreased by approximately $39.5 million. In 2024, the valuation allowance increased by approximately $5.4 million.

 

Unrecognized Tax Benefits

 

At December 31, 2025 and 2024, the Company had no reserves for unrecognized tax benefits.

 

The Company and its subsidiaries are subject to taxation in the United States. The Company is subject to U.S. federal and state examinations for 2022 and forward, and 2021 and forward, respectively. However, net operating losses are subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin.