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

Income Taxes

v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For the years ended December 31, 2025 and 2024, the Company incurred net losses and, accordingly, no federal provision for income taxes has been recorded. In addition, no deferred benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. On December 31, 2025, the Company had approximately $373.8 million of U.S. federal and state net operating losses. On December 31, 2024, the Company had approximately $595.6 million of federal and state net operating losses. The federal net operating losses can be carried forward indefinitely while the state carryforwards will begin to expire in 2030. Federal net operating losses carryforwards generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal net operating losses carryforwards is limited to 80% of current year taxable income. Similar rules may apply under state tax laws.
 
The provision for income taxes consists of the following:

Year Ended December 31,
2025
2024
(in thousands)
Currently reportable expense
Federal
$
—
$
—
State
—
—
—
—
Deferred benefit:
Federal
(22,039)
22,737
State
(9,911)
8,356
(31,950)
31,093
Less: Valuation allowance
31,950
(31,093)
Total provision for income tax expense
$
—
$
—
The following table presents the reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate (in thousands):

Year Ended December 31, 2025
Amount
%
Tax at federal statutory rate
(19,820)
21.0%
State and local income taxes, net of federal benefit
—
—%
Tax credits:
Research tax credit
(41)
—%
Changes in valuation allowances
(24,120)
25.6%
Non-taxable or non-deductible items:
Stock compensation
1,034
(1.1)%
Executive compensation limitation
583
(0.6)%
Other
975
(1.0)%
Cancellation of debt income
41,389
(43.9)%
Effective tax rate
—
— 
%

For the year ended December 31, 2024, prior to the adoption of ASU 2023-09, the following table presents the reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate:
2024
Federal statutory income tax rate
21.0%
State tax
5.5%
Stock-based compensation
0.1%
Non-deductible expenses
(0.8)%
Research and development credit
—%
Change in valuation allowance
(25.8)%
Effective tax rate
— 
%
The components of the Company's deferred tax assets and liabilities are as follows:
December 31,
(in thousands)
2025
2024
Gross deferred tax assets arising from:
Net operating loss carryforwards
$
49,281
$
81,865
ASC 842 lease liability
4,539
3,838
Acquired intangibles
10,566
10,672
Accruals and reserves
10,667
11,688
Capitalized research expenditures
10,533
7,592
Research and development credit carryforward
310
269
Gross deferred tax assets
85,896
115,924
Less: Valuation allowance
(65,196)
(97,220)
Deferred tax assets, net of valuation allowance
20,700 
18,704 
Deferred tax liabilities arising from:
ASC 842 right-of-use asset
(2,700)
(2,924)
Fixed assets and land
(18,000)
(15,780)
Gross deferred tax liabilities
(20,700)
(18,704)
Net deferred tax liabilities
$
—
$
—

For financial reporting purposes, the Company has incurred a loss in each period since its inception. Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation
allowance against its net deferred tax assets at December 31, 2025 and 2024. During the years ended December 31, 2025 and 2024, the change in the valuation allowance of $(32.0) million and $31.1 million, respectively, was primarily due to a decrease in deferred tax assets resulting from the troubled debt restructuring in 2025, partially offset by the generation of additional net operating losses.

As of December 31, 2025 and 2024, the Company had $0.6 million and $0.5 million of federal research and development credits, respectively, which will begin to expire in 2042.

As of December 31, 2025 and 2024, the total amount of unrecognized tax benefits was $0.3 million and $0.3 million, respectively, none of which impact income tax expense. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.

The Company's income tax returns and the amount of income or loss reported are subject to examination by the respective taxing authorities. If such examinations result in changes to the profits or losses, the Company's tax liabilities could be changed accordingly.