Income Taxes |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Taxes | 12. Income Taxes During the three and six months ended June 30, 2026 and 2025, the Company recorded the following income tax provision (in thousands) and effective tax rate:
The change in effective tax rate for the three and six months ended June 30, 2026 and 2025 was primarily due to the business combination with Cullgen and the increase of R&D expenditures. The Company expects to incur income tax expense for the current period as a result of the impact of valuation allowance. Accordingly, the effective tax rate for the six months ended June 30, 2026 was negative. The Company’s income tax provision reflects the retrospective presentation of the common-control combination with Cullgen.
As of June 30, 2026, after consideration of certain limitations (see below), the Company had approximately $193.3 million federal and $21.7 million state net operating loss (“NOL”) carryforwards for U.S. tax purposes available to reduce future taxable income which, if unused, will begin to expire in 2037 for federal and 2034 for state tax purposes. The federal net operating loss carryforward includes $191.9 million that have an indefinite life.
If the Company experiences a greater than 50 percentage point aggregate change in ownership over a three-year period (a Section 382 ownership change), utilization of its pre-change NOL carryforwards is subject to annual limitation under Section 382 of the Internal Revenue Code (California has similar provisions). The annual limitation is determined by multiplying the value of the Company’s stock immediately before such ownership change by the applicable long-term tax-exempt rate. Such limitations may result in expiration of a portion of the NOL carryforwards before utilization. The Company determined that ownership changes under Section 382 occurred on December 31, 2007, August 20, 2015, April 13, 2017, February 15, 2018, February 18, 2020, and December 26, 2022. Approximately $156.5 million and $75.2 million of the NOLs will expire unutilized for federal and California state income tax purposes, respectively. The ability of the Company to use its remaining NOL and credit carryforwards may be further limited if the Company experiences a Section 382 ownership change as a result of future changes in its stock ownership. |
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