13. Income Taxes

No provision or benefit for federal or state income taxes has been recorded, as the Company has incurred a net loss for all of the periods presented, and the Company has provided a full valuation allowance against its deferred tax assets.

At December 31, 2024, the Company had federal net operating loss carryforwards of approximately $1.6 million which will begin to expire in varying amounts annually beginning in 2030 and $46.5 million of federal net operating losses with no expiration. At December 31, 2024, the Company had state net operating loss carryforwards of approximately $36.1 million which will begin to expire in varying amounts annually beginning in 2030. Utilization of net operating losses may be subject to substantial annual limitations due to the “change in ownership” provisions of the Internal Revenue Code, and similar state provisions. The Company is in the process of completing a Section 382 study through December 31, 2024, and preliminarily determined there were likely ownership changes on June 5, 2021 and October 21, 2024, which will result in annual base limitations. The limitations are still being finalized, though the analysis determined there will be sufficient annual limitation to allow for the absorption of pre-change NOLs, and therefore, the Company will not write them off. Conversely, the analysis provides that the Company's federal R&D credits will expire unutilized, and as a result, the Company has written off the deferred tax assets related to these credits.

The Company has maintained a full valuation allowance against its deferred tax assets in all periods presented. A valuation allowance is required to be recorded when it is not more likely than not that some portion or all of the net deferred tax assets will be realized. Since the Company cannot determine that it is more likely than not that it will generate taxable income, and thereby realize the net deferred tax assets, a full valuation allowance has been provided. The valuation allowance increased $4.5 million and $6.4 million for the years ended December 31, 2024 and 2023, respectively. The increases in 2024 and 2023 are primarily related to each year’s taxable loss as well as the increase in stock-based compensation in 2024. The Company has no uncertain tax positions at December 31, 2024 and 2023 that would affect its effective tax rate. Since the Company is in a loss carryforward position, the Company is generally subject to U.S. federal and state income tax examinations by tax authorities for all years for which a loss carryforward is available.

The Tax Cuts and Jobs Act (“TCJA”) resulted in significant changes to the treatment of research and developmental (R&D) expenditures under Section 174. For tax years beginning after December 31, 2021, taxpayers are required to capitalize and amortize all R&D expenditures that are paid or incurred in connection with their trade or business. Specifically, costs for U.S.-based R&D activities must be amortized over five years and costs for foreign R&D activities must be amortized over 15 years- both using a midyear convention. During the year ended December 31, 2024, the Company capitalized for tax purposes $11.3 million and $0.7 million of domestic and foreign R&D expenses, respectively.