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TAXES | 12 Months Ended
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Dec. 31, 2025
TAXES |
TAXES |
8. | TAXES
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the United States. The OBBBA includes significant tax-related provisions, including the permanent extension of certain provisions of the Tax Cuts and Jobs Act, modifications to Section 174 research and development capitalization rules, changes to the Section 163(j) interest expense limitation, and modifications to net operating loss provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company has evaluated the impact of the OBBBA on its deferred tax assets and liabilities as of December 31, 2025. Due to the Company's full valuation allowance against its net deferred tax assets, the OBBBA did not have a material impact on the Company's income tax expense for the year ended December 31, 2025. The components of the income tax expense for the fiscal years ended December 31, 2025 and 2024 are as follows (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ ​ ​ | December 31,
​ | ​ | 2025 | ​ ​ ​ | 2024
Current |  | ​ | ​ |  | ​ | ​
Federal | ​ | $ | — | ​ | $ | —
State | ​ |  | 14 | ​ |  | 34
Foreign | ​ | ​ | — | ​ | ​ | —
Total current | ​ | $ | 14 | ​ | $ | 34
Deferred | ​ |  | ​ | ​ |  | ​
Federal | ​ | $ | — | ​ | $ | —
State | ​ |  | — | ​ |  | —
Foreign | ​ | ​ | — | ​ | ​ | —
Total deferred | ​ | $ | — | ​ | $ | —
Total income tax expense | ​ | $ | 14 | ​ | $ | 34
​ A reconciliation of total income tax expense and the amount computed by applying the federal statutory income tax rate of 21.0% to loss before provision from income taxes for the fiscal years ended December 31, 2025 and 2024 are as follows:
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ | 2025 | ​ | 2024 |
Computed expected tax benefit at federal statutory rate | ​ | $ | (5,437) | ​ | $ | (4,358) | ​
State benefit, net of federal benefit | ​ |  | (575) | ​ | ​ | (285) | ​
Convertible debt change in fair value | ​ |  | 409 | ​ | ​ | — | ​
Stock-based compensation expense | ​ |  | 932 | ​ | ​ | 528 | ​
Extinguishment of debt | ​ |  | — | ​ | ​ | 75 | ​
Change in valuation allowance | ​ |  | 4,621 | ​ | ​ | 3,905 | ​
Foreign rate differential | ​ | ​ | (10) | ​ | ​ | 133 | ​
Other permanent book-tax differences | ​ |  | 35 | ​ | ​ | 36 | ​
Other | ​ | ​ | 39 | ​ | ​ | — | ​
Total income tax expense | ​ | $ | 14 | ​ | $ | 34 | ​
​ Temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (in thousands):
​ | ​ | ​ | ​ | ​ | ​ | ​
​ | ​ ​ ​ | December 31,
Deferred tax assets | ​ | 2025 | ​ ​ ​ | 2024
Accruals and revenues | ​ | $ | 267 | ​ ​ ​ | $ | 473
Stock based compensation | ​ |  | 1,717 | ​ |  | 1,306
Deferred revenue | ​ |  | 536 | ​ |  | 864
Net operating loss | ​ |  | 15,295 | ​ |  | 10,756
Unrealized gain | ​ |  | 15 | ​ |  | 18
Section 163(j) | ​ |  | 945 | ​ |  | 634
Capitalized research & development expenses | ​ |  | 228 | ​ |  | 315
Property and equipment | ​ |  | 5 | ​ |  | 56
Total gross deferred assets | ​ | $ | 19,008 | ​ | $ | 14,422
Valuation allowance | ​ |  | (19,005) | ​ |  | (14,384)
Total deferred tax assets | ​ | $ | 3 | ​ | $ | 38
Deferred tax liabilities | ​ |  | ​ | ​ |  | ​
Right of use asset | ​ |  | (3) | ​ |  | (38)
Total deferred tax liabilities | ​ | $ | (3) | ​ | $ | (38)
Net deferred tax assets | ​ | $ | — | ​ | $ | —
​ In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has recorded a full valuation allowance on its deferred tax asset balances as of December 31, 2025 and 2024. The valuation allowance increased by $4.6 million for the year ending December 31, 2025 and increased by $3.9 million for the year ending December 31, 2024. Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 (“Section 382”). The Company believes that it is more likely than not that a Section 382 change in control occurred on August 12, 2022. The Company is subject to a federal Section 382 annual limitation of $7.8 million annually for the 5 years after the change in control, and a $0.5 million annual limitation thereafter. No deferred tax assets are expected to expire unutilized as a result of this expected change in control. The Company intends to prepare and complete a formal Section 382 analysis of this change in control at the time tax attributes are expected to be utilized. The Company has net operating loss carryforwards for Federal and State income tax purposes of approximately $219.8 million and $176.9 million, respectively, as of December 31, 2025. Of these amounts, $158.1 million of federal net operating losses and $141.7 million of state net operating losses are expected to expire unutilized and thus no deferred tax assets are established for such loss carryforwards as of December 31, 2025. In addition to the Section 382 annual limitation resulting from the August 12, 2022 change in control discussed above, the Company is also subject to a separate federal Section 382 annual limitation of $2.2 million annually for the 5 years following a change in control that occurred in December 2020, and a $0 annual limitation thereafter. Per the Tax Cuts and Jobs Act (“TCJA”) signed into law by President Trump in 2017, the federal NOL carryforwards generated in 2018 and later years can be carried forward indefinitely. The federal NOL carryforwards generated in 2017 and prior years will continue to have their 20-year carryforward period and will begin expiring in 2037. The state NOL carryforwards, if not utilized, will expire beginning in 2029. The Company has federal and state Section 163(j) limited interest expense carryforwards of $6.1 million and $4.8 million for both federal and state as of December 31, 2025 and 2024, respectively. Of these amounts, $1.9 million and $2.2 million of both federal and state Section 163(j) carryforwards are not more likely than not to be utilized and thus no deferred tax assets are established for such NOL carryforwards as of December 31, 2025 and 2024, respectively. Section 163(j) attributes carry forward indefinitely. The Company has $1.4 million of federal and $1.4 million of California state research and development credit carryforwards for Federal and California income tax purposes, respectively, as of December 31, 2025 and 2024. As of December 31, 2025 and 2024 these credits are subject to IRC Section 382 and are not more likely than not to be utilized and thus no deferred tax assets are established for such research credit carryforwards as of December 31, 2025 and 2024. The Company has approximately $0.6 million and $0.5 million of foreign NOL carryforward of 10 years as of December 31, 2025 and 2024, respectively, that begin to expire in 2026. The Company files taxes in the United States, California, various US states and foreign jurisdictions. Due to the Company’s significant net operating loss (NOL) position, the tax returns for the years 2006 through 2024 for U.S. federal purposes and 2008 through 2024 for California remain open to examination by the respective tax authorities. Under the applicable statutes of limitations, the tax authorities generally retain the right to examine these periods and adjust the NOL carryforwards until the statutory period has expired for the year in which the NOLs are utilized. As of December 31, 2025, the Company is not currently under examination by the Internal Revenue Service or any other major taxing authority. The Company had unrecognized tax benefits of $2.8 million as of December 31, 2019 related to research and development tax credits. These unrecognized tax benefits, if recognized, would not affect the effective tax rate. As of December 31, 2025 and 2024, such research and development tax credits are subject to Section 382 limitations and are not more likely than not to be utilized. There were no interest or penalties accrued at December 31, 2025 and 2024. As of December 31, 2025 and 2024, the Company recorded a valuation allowance of $19.0 million and $14.4 million, respectively, against the deferred tax asset balance as realization is uncertain due to a history of operating losses.

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