Income Taxes

12 Months Ended

Dec. 31, 2025

The following table sets forth the domestic and foreign components of loss before income taxes (in thousands):


	Year Ended December 31,
	2025		2024
United States	$	(23,762)	$	(67,301)
Foreign	9,864		(8,948)
Total	$	(13,898)	$	(76,249)

The following table sets forth income tax benefit (expense) (in thousands):


	Year Ended December 31,
	2025		2024
Current expense from income taxes:
State	$	(59)	$	(36)
Foreign	(2,635)		(2,048)
Total current expense from income taxes	(2,694)		(2,084)

Deferred benefit (expense) from income taxes:
Federal	147		815
State	3,737		(1,813)
Foreign	36		(66)
Total deferred benefit (expense) from income taxes	3,920		(1,064)
Total	$	1,226	$	(3,148)

We adopted ASU 2023-09 “Income Taxes (Topic 740) Improvements to Income Tax Disclosures” on a retrospective basis beginning with the year ended December 31, 2024. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to our actual global effective tax amount and rate (in thousands, except percentages):


	Year Ended December 31,
	2025				2024
	Amount		Percent		Amount		Percent
U.S. federal statutory tax rate	$	2,919	21.0	%	$	16,012	21.0	%
State and local income taxes, net of federal income tax effect (1)	3,691		26.6		(1,561)		(2.0)
Foreign tax effects:
Australia:
Interest expense - thin capitalization	—		—		(2,207)		(2.9)
Changes in valuation allowance	(724)		(5.2)		—		—
Return to provision adjustments	599		4.3		—		—
Other	34		0.1		(1,118)		(1.5)
Hong Kong:
Withholding tax	(1,089)		(7.8)		923		1.2
Statutory rate difference between Hong Kong and U.S.	355		2.6		—		—
Return to provision adjustments	212		1.5		—		—
Foreign tax credit	539		3.9		—		—
Other	151		1.1		965		1.3
United Kingdom:
Changes in valuation allowance	(197)		(1.4)		—		—
Other	104		0.7		—		—
China:
Local statutory to GAAP adjustments	389		2.8		—		—
Other	167		1.2		—		—
Other foreign jurisdictions	—		—		(34)		—
Effect of cross-border tax laws:
Subpart F	(2,473)		(17.8)		(1,592)		(2.1)
Withholding Tax	(323)		(2.3)		(2,005)		(2.6)
Section 367(d) deemed royalty income	(1,123)		(8.1)		(981)		(1.3)
Changes in valuation allowance	(5,627)		(40.5)		(12,116)		(15.9)
Nontaxable or nondeductible items:
Intangible impairments	—		—		(3,575)		(4.7)
Excess stock-based compensation expense	(580)		(4.2)		—		—
Other	(183)		(1.3)		(902)		(1.2)
Changes in unrecognized tax benefits	(640)		(4.6)		(514)		(0.7)
Other reconciling items	5,025		36.2		5,557		7.3
Total	$	1,226	8.8	%	$	(3,148)	(4.1)	%

_________________

(1)The state and local jurisdiction that contributes to the majority (greater than 50%) of the tax effect in this category is California.

On August 16, 2022, the Inflation Reduction Act (“IRA”) was signed into law in the United States and includes a 15% book minimum tax on corporations with financial accounting profits over $1 billion and a 1% excise tax on certain stock buybacks. The IRA also contains numerous clean energy tax incentives related to electricity production, carbon sequestration, alternative vehicles and fuels, and residential and commercial energy efficiency. The IRA did not have any material impact on the Company’s consolidated financial statements for the years ended December 31, 2025 and 2024.

The Company repatriated foreign earnings of $6.1 million to the United States for the year ended December 31, 2025. Due to the Company’s overall losses incurred and the deduction in the United States for dividends received, such repatriation did not have any material impact on the Company’s tax provision for the year ended December 31, 2025.

Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to differences between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to apply in the years in which the temporary differences are expected to reverse.

The following table sets forth the significant components of deferred tax assets and liabilities (in thousands):


	December 31,
	2025		2024
Deferred tax assets:
Net operating loss carryforwards	$	93,963	$	86,460
Deferred revenue	625		1,477
Stock-based compensation	2,334		2,304
Investments in partnership	666		2,919
Property and equipment, net	611		385
Operating lease liabilities	5,410		6,247
Other deductible temporary differences	18,367		17,808
Total deferred tax assets	121,976		117,600
Less valuation allowance	(90,767)		(86,826)
Deferred tax assets, net	$	31,209	$	30,774

Deferred tax liabilities:
Intangible assets	$	(33,350)	$	(35,934)
Operating right of use assets	(4,277)		(5,142)
Total deferred tax liabilities	$	(37,627)	$	(41,076)
Deferred tax liabilities, net	$	(6,418)	$	(10,302)

The realization of deferred income tax assets may be dependent on the Company’s ability to generate sufficient income in future years in the associated jurisdiction to which the deferred tax assets relate. The Company considers all available positive and negative evidence, including scheduled reversals of deferred income tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based on the review of all positive and negative evidence, including a three-year cumulative pre-tax loss, the Company concluded that except for the deferred tax liability recorded on certain indefinite life intangibles, it should record a full valuation allowance against all other net deferred income tax assets at December 31, 2025 and 2024 as none of these deferred income tax assets were more likely than not to be realized as of the balance sheet dates. However, the amount of the deferred income tax assets considered realizable may be adjusted if estimates of future taxable income during the carryforward period are increased or if objective negative evidence in the form of cumulative losses is no longer present. Based on the level of historical operating results the Company has recorded a valuation allowance of $90.8 million and $86.8 million as of December 31, 2025 and 2024, respectively. During the years ended December 31, 2025 and 2024, the Company’s valuation allowance increased by $4.0 million and increased by $14.7 million, respectively. The increase in valuation allowance in 2025 and 2024 was primarily driven by the increase of federal and foreign NOLs.

As of December 31, 2025, the Company had U.S. federal and state NOL carryforwards of $378.6 million and $149.1 million, respectively, available to offset taxable income in tax year 2025 and thereafter. Of the $378.6 million in federal NOL carryforwards, $196.2 million can be carried forward indefinitely, and the remaining NOL carryforwards start to expire in 2028. Of the $149.1 million in state NOL carryforwards, $9.4 million can be carried forward indefinitely and the remaining start to expire in 2028. The Company also had Australian NOLs, United Kingdom (“U.K.”) NOLs and Hong Kong NOLs of $11.9 million, $1.2 million and $0.2 million, respectively, that can be carried forward indefinitely.

Tax laws impose restrictions on the utilization of NOL carryforwards in the event of a change in ownership of the Company as defined by Internal Revenue Code Sections 382 and 383. The Company has experienced ownership changes in the past that impact the availability of its net operating losses and tax credits. The Company’s ability to utilize existing carryforwards could be substantially restricted should there be additional ownership changes in the future.

A summary of changes to the amount of unrecognized tax benefits is as follows (in thousands):


	Year Ended December 31,
	2025		2024
Balance at the beginning of the year	$	1,110	$	596
Increase (decrease) for positions taken in the current year	781		514
Decrease related to settlements with taxing authorities	(140)		—
Balance at the end of the year	$	1,751	$	1,110

The Company records a tax benefit from uncertain tax positions only if it is more likely than not the tax position will be sustained with the taxing authority having full knowledge of all relevant information. The Company records a reduction to deferred tax assets for unrecognized tax benefits from uncertain tax positions as discrete tax adjustments in the first period that the more-likely-than-not threshold is not met. The Company recorded unrecognized net tax benefits of $0.6 million for the year ended December 31, 2025 and $0.5 million for the year ended December 31, 2024. The unrecognized tax benefits are related to foreign withholding taxes on the Company’s licensing revenue, allocation of expenses between foreign jurisdictions and permanent establishment risk in a foreign country.

The reversal of the uncertain tax benefits would affect the effective tax rate. The Company has not incurred any material interest or penalties as of the current reporting period with respect to income tax matters. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. We estimate that none of the unrecognized tax benefits will be recognized over the next 12 months. As of December 31, 2025 and 2024, there were no material interest and penalties associated with unrecognized tax benefits recorded in the Company’s consolidated statements of operations or consolidated balance sheets.

The Company is subject to examinations by taxing authorities for income tax returns filed in the U.S. federal and states as well as foreign jurisdictions. The Company is no longer subject to income tax examination by the U.S. federal, state or local tax authorities for years ended December 31, 2020 or prior; however, its tax attributes, such as NOL carryforwards, are still subject to examination in the year they are used. In our foreign tax jurisdictions, the statute of limitation for tax years after 2019 remain open for examinations in Australia, for tax years after 2021 in the U.K., and for tax years after 2023 in China and Hong Kong.

The amounts of cash income taxes paid by the Company were as follows (in thousands):


	Year Ended December 31,
	2025		2024
Federal	$	341	$	587
State and local	105		123
Foreign:
Hong Kong	1,084		863
China	(360)		374
All other	—		99
Total income taxes paid, net of amounts refunded	$	1,170	$	2,046

- Definition

The entire disclosure for income tax.

+ References

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+ Details

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