Note 8 - Income Taxes

The following table presents the domestic and foreign components of loss before income taxes for the years ended December 31, 2025 and 2024, respectively:

The components of income tax provision consist of the following for the years ended December 31, 2025 and 2024, respectively:

No income taxes were paid during the years ended December 31, 2025 and 2024, respectively.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2025 and 2024 are as follows:

In assessing the realizability of the net deferred tax assets, the Company considers all relevant positive and negative evidence to determine whether it is more likely than not that some portion of the deferred income tax will not be realized. The realization of gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to expiration of the net operating loss carryforwards. At December 31, 2025 and 2024, the Company has recorded a full valuation allowance against its net deferred tax assets of approximately $116.1 million and $101.6 million respectively. The change in the valuation allowance during the year ended December 31, 2025 was $14.5 million.

At December 31, 2025, the Company had federal net operating loss (NOL) carryforwards of $218.9 million At December 31, 2025, the Company had foreign NOL carryforwards of $48 thousand. At December 31, 2025 the Company had federal research and development and Orphan drug credit credits of $24.8 million. Federal NOL carryforwards of $104.8 million generated prior to 2018 will begin to expire if unused beginning in 2026, when $3.6 million in NOLs are due to expire. The Company’s largest NOLs will begin to expire in 2034 - 2037, with each year in excess of $15 million. NOLs generated in 2018 and later years of $114.6 million have an indefinite life, but will be limited to 80% of their value.

Sections 382 and 383 of the Internal Revenue Code of 1986 subject the future utilization of net operating losses and certain other tax attributes, such as research and experimental tax credits, to an annual limitation in the event of certain ownership changes. The Company may be subject to the net operating loss utilization provision of Section 382 of the Internal Revenue Code. The effect of an ownership change would be the imposition of an annual limitation of the use of NOL carryforwards attributable to periods before the change. The amount of the annual limitation depends upon the value of the Company immediately before the change, changes to the Company’s capital during a specified period prior to the change, and the federal published interest rate. Although the Company has not completed an analysis under Section 382 of the Code, it is likely that the utilization of the NOLs will be limited.

For state income tax purposes, the Company has $204.6 million of unused NOLs at December 31, 2025 available for carry forward to future years. These NOLs will begin to expire in 2035 if unused.

The Company has federal research and development tax credits of $8.1 million at December 31, 2025, which will begin to expire in 2033 if unused and orphan drug credits of $16.7 million which will begin to expire in 2037 if unused.

The difference between the income tax provision and the amount that would result if the U.S. Federal statutory rates were applied to pre-tax losses for the year ended December 31, 2025 and 2024 after the adoption of ASU 2023-09 are as follows:

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2025 there were no uncertain positions. The Company’s U.S. federal and state net operating losses have occurred since its inception in 2009 and as such, tax years subject to potential tax examination could apply from that date. This is because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for the years ended December 31, 2025 and 2024.