Income Taxes

12 Months Ended

Dec. 31, 2025

Income Taxes

Income Taxes

11. Income Taxes

Loss before income taxes consisted of the following components (in thousands):

	Year Ended December 31,
	2025		2024
United States	$	(172,964)	$	(18,020)
Foreign		(835)		(896)
Total	$	(173,799)	$	(18,916)

The Company has not recognized any current or deferred tax expense on its US and foreign pre-tax losses for the years ended December 31, 2025 and 2024.

Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):

	December 31,
	2025		2024
Deferred tax assets:
Net operating loss carryforwards	$	66,902	$	53,618
Capitalized research and development		19,062		24,045
Stock-based compensation		1,931		1,804
Depreciation		666		762
Lease accounting		12,846		13,505
Interest expense carryforward		3,340		1,292
Other		2,336		2,086
Total deferred tax assets before valuation allowance		107,083		97,112
Less: valuation allowance		(97,776)		(84,217)
Total deferred tax assets after valuation allowance		9,307		12,895
Deferred tax liabilities:
Right-of-use asset		(8,755)		(10,763)
In-process research and development		(3,077)		(3,077)
Debt basis differences		(405)		(1,991)
Other		(147)		(141)
Total deferred tax liabilities		(12,384)		(15,972)
Net deferred tax liability	$	(3,077)	$	(3,077)

The Company’s net operating loss carryforwards at December 31, 2025 are $248.7 million, $163.9 million and $13.4 million for federal, state and foreign income tax purposes, respectively. Federal and state net operating loss carryforwards are available to offset future taxable income, if any, and will begin to expire in 2026 and 2029, respectively. The federal net operating loss carryforwards generated after 2017 of $194.2 million will carryforward indefinitely and can be used to offset up to 80% of future annual taxable income. The Company's foreign net operating loss carryforwards do not expire.

The Company’s net operating loss carryforwards may be subject to a substantial annual limitation as a result of ownership changes that have occurred or could occur in the future pursuant to Internal Revenue Code Sections 382 and 383. These ownership changes may limit or eliminate the amount of net operating loss carryforwards that can be utilized to offset future taxable income. If eliminated, the related asset would be removed from deferred tax assets with a corresponding reduction in the valuation allowance. In general, an 'ownership change' as defined by the tax code results from a transaction or series of transactions over a three-year period resulting in an ‘ownership change’ of more than 50 percent of the outstanding stock of a company by certain stockholders or public groups. The Company has not completed an ownership change analysis pursuant to Internal Revenue Code Section 382 as of December 31, 2025.

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use existing deferred tax assets. Based on the weight of available evidence, including the Company's history of operating losses, management has determined that it is more likely than not that the Company’s net deferred tax assets will not be realized. Accordingly, a valuation allowance has been established by the Company to fully offset these net deferred tax assets. The Company increased its valuation allowance by approximately $13.6 million during the year ending December 31, 2025.

The differences between the Company’s effective tax rate and the U.S. federal statutory tax rate were as follows (in thousands, except percentages):

	December 31, 2025
	Amount	%
Income taxes (benefit) at statutory federal rate	(36,498)	21.0	%
State and local taxes, net of federal income tax effect	-	0.0	%
Foreign tax effects
Other foreign	175	(0.1)	%
Change in valuation allowance	10,453	(6.0)	%
Non-taxable or nondeductible items
Stock compensation	137	(0.1)	%
Non-deductible debt items	25,403	(14.6)	%
Other	330	(0.2)	%
Effective income tax rate	-	0.0	%

The Company did not pay federal, state, or foreign cash income taxes or have cash income taxes refunded in the years ended December 31, 2025. The Company’s domestic operations are principally in the state of California.

As previously disclosed for the year ended December 31, 2024 and prior to the adoption of ASU 2023-09, the reconciliation of income tax benefit at the U.S. federal statutory rate to the provision for income taxes is as follows:

	December 31,
	2024
U.S. federal statutory income tax rate	21.0	%
Adjustments for tax effects of:
State income taxes, net of federal tax	9.6	%
Stock-based compensation	(3.7)	%
Non-deductible debt items	25.3	%
Change in valuation allowance	(49.7)	%
Change in rate	0.5	%
Return to provision	(1.6)	%
Permanent differences and other	(1.4)	%
Effective income tax rate	(0.0)	%

The Company files income tax returns in the U.S. federal jurisdiction, state of California and certain foreign jurisdictions. As of December 31, 2025, the Company is no longer subject to U.S. federal income tax examinations for tax years ended on or before December 31, 2021 or to California state income tax examinations for tax years ended on or before December 31, 2020. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward.

The Company did not have a liability for unrecognized tax benefits at December 31, 2025 and 2024.

The Company’s policy is to classify interest and penalties on uncertain tax positions as a component of tax expense. As of December 31, 2025 and 2024, the Company has no accrued interest or penalties related to uncertain tax positions.

Deferred income taxes have not been provided for undistributed earnings of the Company’s consolidated foreign subsidiary because the parent entity would not be required to include the distribution into income as the amount would be tax free.

The Tax Cuts and Jobs Act subjects a U.S. stockholder to tax on GILTI earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740 No. 5. Accounting for Global Intangible Low-Taxed Income, states that an entity can

make an accounting policy election either to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI in the year the tax is incurred.

On July 4, 2025, the U.S. President signed into law H.R.1, the legislation commonly known as the One Big Beautiful Bill Act (OBBBA). This legislation extended, modified, or made permanent many of the tax provisions which were initially enacted as part of the Tax Cuts and Jobs Act (TCJA) of 2017. The OBBBA contains a number of tax provisions including, but not limited to, immediate expensing of domestic research and experimental expenditures, modifications to the limitation on business interest, bonus depreciation modifications, as well as international tax provision modifications. These tax provisions apply to either tax years beginning after December 31, 2024 or December 31, 2025. The Company has reflected the effect of OBBBA within the provision for income taxes and the deferred taxes as of December 31, 2025.