14. Income Taxes

For the years ended December 31, 2024 and 2023, the Company recorded no current or deferred income tax expenses or benefits as it has incurred losses since inception and has provided a full valuation allowance against its deferred tax assets.

As of December 31, 2024, the Company had federal net operating loss carryforwards of approximately $388.4 million, of which $17.5 million will begin to expire in 2035 and the remaining can be carried forward indefinitely. As of December 31, 2024, the Company had state tax net operating loss carryforwards of approximately $352.3 million, which will begin to expire in 2035. As of December 31, 2024, the Company also had available research and orphan drug tax credit carryforwards for federal and state income tax purposes of $19.1 million and $3.7 million, respectively, which will begin to expire in 2035 and 2030, respectively.

In assessing the realizability of the net deferred tax assets, management considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. Management believes that it is more likely than not that the Company’s deferred income tax assets will not be realized.

Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2024 and 2023 related primarily to the increase in net operating loss carryforwards, capitalized research and development expenses and research tax credit carryforwards. During the years ended December 31, 2024 and 2023, capitalized research and development expenses increased pursuant to Section 174 of the Internal Revenue Code of 1986, as amended (the “Code”). The changes in the valuation allowance for the years ended December 31, 2024 and 2023 were as follows:

Net operating loss carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has not yet conducted a study to determine if any such changes have occurred that could limit the ability to use the net operating loss carryforwards. However, the Reverse Merger is expected to result in an ownership change. Therefore, the Company does not expect to be able to utilize a material portion of the net operating losses and research and orphan drug tax credit carryforwards.

The Company has not recorded any liabilities for unrecognized tax benefits as of December 31, 2024 or 2023. The Company will recognize interest and penalties related to uncertain tax positions, if any, in income tax expense. As of December 31, 2024 and 2023, the Company had no accrued interest or penalties related to uncertain tax positions.