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

Income Tax

v3.25.4
Income Tax
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Tax

Note 9 – Income Tax

 

The Company did not record any income tax provision for the years ended December 31, 2025 and 2024, respectively, due to the Company’s net losses. The Company files income tax returns in the United States (“Federal”) and California and Minnesota (“State”) jurisdictions. The Company is subject to Federal and State income tax examinations by tax authorities for all years since its inception. At December 31, 2025, the Company had Federal and State net operating loss carry forwards available to offset future taxable income of approximately $260 million. These carry forwards will begin to expire in the year ending December 31, 2030, subject to IRS limitations, including change in ownership. The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by a valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of our deferred tax assets, including recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carry-forward periods available to us for tax reporting purposes, and other relevant factors.

 

Based on the weight of available evidence, including cumulative losses in recent years and expectations of future taxable income, the Company has determined that it was more likely than not that its deferred tax assets would not be realized at December 31, 2025 and 2024, respectively. Accordingly, the Company has recorded a valuation allowance for 100% of its cumulative deferred tax assets.

 

Deferred 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, and operating losses and tax credit carryforwards. The significant components of net deferred income tax assets are:

 

             
    December 31,  
    2025     2024  
Deferred tax assets:                
Federal net operating loss carryforward   $ 73,325,000     $ 73,403,000  
Stock based compensation and other items     7,960,000       3,054,000  
Intellectual property     57,103,000       32,599,000  
Section 14 research and development     2,718,000       3,128,000  
Deferred tax assets before valuation     141,106,000       112,184,000  
Valuation allowance     (141,106,000 )     (112,184,000 )
Net deferred income tax assets   $ —     $ —  

 

A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income tax provision is as follows for the years ended:

 

             
    December 31,  
    2025     2024  
Federal statutory income tax rate     21 %     21 %
State tax, net of federal benefit     7 %     8 %
Change in valuation allowance on net operating loss carryforwards     (28 )%     (29 )%
Effective income tax rate     0 %     0 %