INCOME TAXES |
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| INCOME TAXES | 5. INCOME TAXES The Company’s effective tax rate on the net loss before income taxes was (0.06)% and (2.1)% for the three months ended June 30, 2026 and 2025, respectively. The Company’s effective tax rate on the net loss before income taxes was (0.29)% and (2.8)% for the six months ended June 30, 2026 and 2025, respectively. The Company adopted ASU 2023-09 as of January 1, 2025. As a result, the Company enhanced its income tax disclosures, including additional disaggregation of effective tax rate reconciliation and income taxes paid. A reconciliation of the federal statutory corporate tax rate to the Company’s effective tax rate is as follows:
The Company uses the recognition and measurement provisions of the FASB ASC Topic 740, Income Taxes (“Topic 740”), to account for income taxes. The provisions of Topic 740 require a company to record a valuation allowance when the “more likely than not” criterion for realizing net deferred tax assets cannot be met. Furthermore, the weight given to the potential effect of such evidence should be commensurate with the extent to which it can be objectively verified. The Company reviewed the operating results, as well as all of the positive and negative evidence related to realization of such deferred tax assets, to evaluate the need for a valuation allowance. As a result of this review, as of June 30, 2026, the Company concluded that a $11.8 million valuation is needed on the net deferred tax asset. As of December 31, 2025, the Company recorded a valuation allowance of $11.6 million against its net deferred tax asset. The effective tax rate for the three and six months ended June 30, 2026 was different from the federal statutory rate due primarily to the increase of the valuation allowance on the Company’s deferred tax asset. |
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