XML 30 R18.htm IDEA: XBRL DOCUMENT v3.25.3
Income Taxes
 9 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
In assessing the realizability of deferred tax assets, including the net operating loss carryforwards (NOLs), the Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize its existing deferred tax assets. Based on its assessment, the Company has provided a full valuation allowance against its net deferred tax assets as their future utilization remains uncertain at this time.
As of December 31, 2024 and 2023, the Company had approximately $57.9 million and $43.7 million, respectively, of Federal NOLs available to offset future taxable income expiring from 2030 through 2036. The Company performed an analysis and determined that they had an ownership change of greater than 50% on September 15, 2022. As a result of the ownership change, $88.2 million of Federal NOLs will expire unutilized. The Company wrote off that portion of the deferred tax asset and reduced the corresponding valuation allowance resulting in $34.0 million of remaining Federal NOLs as of December 31, 2022. The write-off of the deferred tax asset and the corresponding reduction in valuation allowance has no impact to the consolidated balance sheet or income statement. Losses incurred before the ownership change on September 15, 2022 will be subject to an annual limitation of zero while losses incurred after September 15, 2022 will not be subject to limitations.
As of December 31, 2022, Cend Therapeutics, Inc. (“Cend”) had approximately $3.6 million of Federal NOLs available to offset future taxable income. The Company performed an analysis and determined that there was an ownership change of greater than 50% on September 15, 2022. As of September 15, 2022 Cend has approximately $3.1 million of Federal and $4.3 million of state NOLs. The state NOLs will expire from the 2036 through 2042 tax years. Using a fair market value of $36.1 million and applying an applicable federal rate of 2.54% Cend will have an annual limitation of approximately $917 thousand each year. The Federal NOL of $459 thousand incurred in the post-acquisition period September 15, 2022 to December 31, 2022 is not subject to limitation, and does not expire.
As of December 31, 2024 and 2023, the Company's wholly owned Australian subsidiary had approximately $2.3 million and $2.4 million, respectively, of NOLs which will be carried forward and do not expire. There is a full valuation allowance against the NOLs.
As of December 31, 2024, the Company had federal research and development credit carryforwards of $0.5 million expiring from 2027 through 2034 if unutilized, and state research and development credit carryforwards of $0.1 million, which carryforward indefinitely. Utilization of these credits may be subject to an annual limitation based on changes in ownership.
As of December 31, 2024 and 2023, the Company had State NOLs available in New Jersey of $24.6 million and $19.4 million, respectively, California of $9.2 million and $9.2 million, respectively, and New York City of $1.9 million and $1.9 million, respectively, to offset future taxable income expiring from 2032 through 2044. The usage of the Company’s NOLs is limited given the change in ownership.
The Company applies the Financial Accounting Standards Board provisions for uncertain tax positions. The Company utilizes the two-step process to determine the amount of recognized tax benefit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant taxing authority. The Company recognizes interest and penalties associated with certain tax positions as a component of income tax expense.
As of December 31, 2024 and 2023, the Company’s uncertain tax positions were $344 thousand and $344 thousand, respectively. The uncertain tax positions are due to the acquisition of Cend related to Federal and state credits and certain state
NOLs. The Company will continue to evaluate its uncertain tax positions in future periods. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.
For years prior to 2021, the federal statute of limitations is closed for assessing tax. The Company’s state tax returns remain open to examination for a period of three to four years from the date of the tax return filing.
In January 2025, the Company sold a portion of their unused New Jersey net operating losses through the State of New Jersey Economic Development Authority's (“NJEDA”) Technology Business Tax Certificate Transfer Program (“Program”). Under the Program, the Company sold $10.7 million of its New Jersey net operating losses (“NJ NOLs”) for net proceeds of $871 thousand. The sale of NJ NOLs resulted in a $962 thousand deferred income tax benefit and a loss on sale of $91 thousand recorded in other income (expense) in the consolidated financial statements.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. ASC 740, “Income Taxes”, requires the tax effects of changes in tax rates and tax law be recognized in the period in which the legislation is enacted. The Company completed its initial assessment of OBBBA for the quarter ended September 30, 2025. For the provisions effective in 2025, there was no material impact to the Company’s effective tax rate for the quarter ended September 30, 2025. The Company will continue to evaluate the impact of the new legislation on its consolidated financial statements as additional guidance is issued.