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Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
8.
Income Taxes

The Company's pretax loss for 2025 and 2024 was solely due to domestic operations.

For the years ended December 31, 2025, and 2024, due to the operating losses reported and the full valuation allowance recorded on the Company’s net deferred income tax assets, the Company recorded no provision for income taxes.

There were no federal or state payments for income taxes in 2025 or 2024.

A reconciliation of the Company’s income taxes to the amount computed by applying the statutory federal income tax rate to the pretax loss is summarized as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

 

2025

 

 

2024

 

Tax at statutory rates

 

$

(12,094

)

 

 

21.0

%

 

$

(4,323

)

 

 

21.0

%

State and local income taxes, net of federal income tax effect*

 

 

(136

)

 

 

0.2

%

 

 

(50

)

 

 

0.2

%

 Effects of changes in tax laws or rates in the current period

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Tax credits:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development credits

 

 

(5,286

)

 

 

9.2

%

 

 

(2,986

)

 

 

14.5

%

Change in valuation allowance

 

 

15,766

 

 

 

(27.4

)%

 

 

6,146

 

 

 

(29.8

)%

Nontaxable or nondeductible items:

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

221

 

 

 

(0.4

)%

 

 

84

 

 

 

(0.4

)%

Research expenses

 

 

—

 

 

 

—

 

 

 

347

 

 

 

(1.7

)%

Executive compensation

 

 

138

 

 

 

(0.2

)%

 

 

—

 

 

 

—

 

Permanent differences

 

 

20

 

 

 

—

 

 

 

(14

)

 

 

0.1

%

Changes in unrecognized tax benefits

 

 

1,371

 

 

 

(2.4

)%

 

 

796

 

 

 

(3.9

)%

Other, net

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total income tax expense (benefit)

 

$

—

 

 

 

—

 

 

$

—

 

 

 

—

 

*State income taxes in California comprise the majority (greater than 50%) of the tax effect in this category.

Significant components of the Company’s deferred income taxes were as follows (in thousands):

 

 

 

December 31,

 

 

 

2025

 

 

2024

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforward

 

$

23,497

 

 

$

8,627

 

Capitalized R&D

 

 

3,731

 

 

 

4,202

 

Investment in securities

 

 

1,301

 

 

 

1,298

 

R&D tax credits

 

 

7,659

 

 

 

3,256

 

Allowance for receivables

 

 

711

 

 

696

 

Other, net

 

 

1,761

 

 

628

 

Total gross deferred tax assets

 

 

38,660

 

 

 

18,707

 

Deferred tax liabilities:

 

 

 

 

 

 

Right-of-use asset

 

 

(99

)

 

 

(206

)

Cash to accrual method change

 

 

(32

)

 

 

(63

)

Other, net

 

 

(7

)

 

 

(2

)

Total gross deferred tax liabilities

 

 

(138

)

 

 

(271

)

Valuation allowance

 

 

(38,522

)

 

 

(18,436

)

Net deferred tax assets

 

$

—

 

 

$

—

 

The Company establishes a valuation allowance when it is more likely than not that the Company’s recorded net deferred tax asset will not be realized. In determining whether a valuation allowance is required, the Company must take into account all positive and negative evidence with regard to the utilization of a deferred tax asset. As of December 31, 2025 and 2024, the valuation allowance for deferred tax assets totaled approximately $38.5 million and $18.4 million, respectively. The net change in the total valuation allowance for the years ended December 31, 2025 and 2024 was an increase of $20.1 million and $7.8 million, respectively.

As of December 31, 2025, the Company had federal and state net operating carryforwards of approximately $79.3 million and $96.5 million, respectively. The federal loss carryforwards will carryforward indefinitely and can be used to offset up to 80% of future annual taxable income. The state loss carryforwards begin expiring in 2037, unless previously utilized.

As of December 31, 2025, the Company had federal and state research and development credit carryforwards totaling $2.0 million and $1.4 million, respectively. As of December 31, 2025, the Company also had federal orphan drug credit carryovers of $7.1 million. The federal credits begin to expire in 2041, unless previously utilized. State credits of $0.2 million begin to expire in 2040, unless previously utilized, while the remainder of the credits will carryforward indefinitely.

Pursuant to Internal Revenue Code of 1986, as amended (“IRC”), Sections 382 and 383, annual use of the Company’s federal and state net operating loss and research and development credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an IRC Section 382 and 383 analysis regarding the limitation of net operating loss and research and development credit carryforwards. The deferred tax asset associated with the Company’s federal and state net operating losses is fully offset by a valuation allowance. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. The Company intends to complete an IRC Section 382 study in the future, which could result in reductions to deferred tax assets and related valuation allowance disclosed above.

Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement. Adjustment may result, for example, upon resolution of an issue with the taxing authorities or expiration of a statute of limitations, barring an assessment for an issue. The Company recognizes a tax benefit from an uncertain tax position when it is more-likely-than-not that it will be sustained upon examination by tax authorities.

A reconciliation of the amount of unrecognized tax benefits is as follows (in thousands):

 

 

 

Year Ended December 31,

 

 

2025

 

 

2024

 

Beginning balance

 

$

1,104

 

 

$

294

 

Additions related to current year positions

 

 

1,494

 

 

 

810

 

Additions (decreases) related to prior year positions

 

 

(86

)

 

 

—

 

Additions (decreases) due to settlement

 

 

—

 

 

 

—

 

Expiration of unrecognized tax benefits

 

 

—

 

 

 

—

 

Ending balance

 

$

2,512

 

 

$

1,104

 

 

The Company’s policy is to include interest and penalties related to unrecognized income tax benefits as a component of income tax expense. The Company has no accruals for interest or penalties in the accompanying consolidated balance sheet as of December 31, 2025 or 2024 and has not recognized interest or penalties in the accompanying consolidated statements of operations and comprehensive loss for the years then ended.

The Company is subject to taxation in the United States and various state jurisdictions. The Company is generally subject to examination by U.S. federal and state tax authorities from inception to date; however, to the extent allowed by law, the taxing authorities may have the right to examine periods where net operating losses were generated and carried forward and make adjustments to the amount of the net operating losses. The Company is not currently under examination by any jurisdictions.

On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was signed into law. Among other changes, the Act reinstates and makes permanent 100% first-year bonus depreciation under Section 168(k) for qualified property acquired and placed in service after January 19, 2025. Additionally, the Act permanently allows immediate expensing of domestic research and experimentation expenditures under Section 174 for tax years beginning after December 31, 2024. The Company has reflected the effects of the Act in its income tax provision in accordance with authoritative guidance. Due to the full valuation allowance, the Act did not have a material impact on the Company's consolidated financial statements.