Contineum Therapeutics, Inc.CTNM
Contineum Therapeutics, Inc. Income Taxes Disclosure
Income Taxes
For financial reporting purposes, income before income taxes includes the following components (in thousands) for the years ended December 31, 2025 and 2024:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| United States | $ | (60,143) | $ | (42,258) | |||||||
| Foreign | — | — | |||||||||
| Income/(loss) before income taxes | $ | (60,143) | $ | (42,258) | |||||||
The following is a reconciliation of the federal statutory income tax rate and the Company’s effective income tax rate for the years ended December 31, 2025 and 2024 is as follows (in thousands):
| Years Ended December 31, 2025 | |||||||||||
| Federal statutory income tax rate | $ | (12,630) | 21.0 | % | |||||||
State income taxes, net of federal benefit (1) | 1 | — | % | ||||||||
| Foreign tax effects | — | — | % | ||||||||
| Tax credits | |||||||||||
| Other | (1,096) | 1.8 | % | ||||||||
| Change in valuation allowance | 11,940 | (19.9) | % | ||||||||
| Changes in unrecognized tax benefits | — | — | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| 162m Limitation | 655 | (1.1) | % | ||||||||
| Other | 422 | (0.7) | % | ||||||||
| Other | |||||||||||
| Other | 708 | (1.2) | % | ||||||||
| Total | $ | — | — | % | |||||||
(1) In 2025, state taxes in California made up the majority (greater than 50 percent) of the tax effect in this category.
| Years Ended December 31, 2024 | |||||||||||
| Expected tax benefit at statutory rate | $ | (8,885) | 21.0 | % | |||||||
| State income tax, net of federal benefit | 1 | — | % | ||||||||
| Permanent differences | 1,018 | (2.4) | % | ||||||||
| Research credits | (2,149) | 5.1 | % | ||||||||
| Change in valuation allowance | 10,015 | (23.7) | % | ||||||||
| $ | — | — | % | ||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024 are as follows:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 33,123 | $ | 14,478 | |||||||
| Research and development credit carryforwards | 9,091 | 6,618 | |||||||||
| Capitalized research and development | 2,762 | 12,699 | |||||||||
| Lease liabilities | 1,733 | 1,314 | |||||||||
| Stock-based compensation | 2,181 | 1,121 | |||||||||
| Other, net | 808 | 608 | |||||||||
| Total deferred tax assets | 49,698 | 36,838 | |||||||||
| Valuation allowance | (47,960) | (35,548) | |||||||||
| Deferred tax assets, net of valuation allowance | 1,738 | 1,290 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment | (134) | (142) | |||||||||
| Right-of-use assets | (1,604) | (1,148) | |||||||||
| Total deferred tax liabilities | (1,738) | (1,290) | |||||||||
| Net deferred tax assets/(liabilities) | $ | — | $ | — | |||||||
The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced. The Company has recorded a full valuation allowance of $48.0 million and $35.5 million as of December 31, 2025 and 2024, respectively, as it does not believe it is more likely than not that certain deferred tax assets will be realized primarily due to the generation of pre-tax book losses, no ability to carryback losses, the lack of feasible tax-planning strategies, the limited existing taxable temporary differences, and the subjective nature of forecasting future taxable income into the future.
At December 31, 2025, the Company had federal and California tax loss carry forwards of approximately $135.5 million and $81.4 million, respectively. Out of the total federal net operating losses, approximately $135.5 million were generated after December 31, 2017, and therefore do not expire. Net operating losses generated after December 31, 2017, are subject to a limitation of 80% of taxable income in accordance with the Tax Cuts and Jobs Act of 2017. The remaining federal and state net operating loss carry forwards begin to expire in 2037 and 2036, respectively, if unused.
At December 31, 2025, the Company had federal and state research and development tax credit carryforwards of approximately $8.1 and $4.0 million, respectively. The Company has not performed a formal research and development credit study with respect to these credits. The federal credits will begin to expire in 2032, if unused, and the state credits carry forward indefinitely.
Pursuant to the IRC, as amended, specifically IRC §382 and IRC §383, the Company’s ability to use net operating loss and R&D tax credit carry forwards (“tax attribute carry forwards”) to offset future taxable income is limited if the Company experiences a cumulative change in ownership of more than 50% within a three-year testing period. The Company has completed an ownership change analysis pursuant to IRC Section 382 and identified that ownership changes occurred in July 2012, April 2018, March 2019 and February 2021. The Company’s deferred tax assets related to the tax attributes impacted have been adjusted through December 31, 2021 based on such analysis. As a result of limitations arising from the prior ownership changes, $0.5 million of federal and $3.7 million of California net operating loss carry-forwards were removed from the inventory of deferred tax assets. In addition, $0.2 million of federal R&D tax credits were removed as of December 31, 2022. If further ownership changes within the meaning of IRC Section 382 are identified as having occurred, the amount of remaining tax attribute carry-forwards available to offset future taxable income and income tax expense in future years may be significantly restricted or eliminated. Further, the Company’s deferred tax assets
associated with such tax attributes could be significantly reduced upon realization of an ownership change within the meaning of IRC §382.
The following table summarizes the reconciliation of the unrecognized tax benefits activity during the years ended December 31, 2025 and 2024 (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Unrecognized tax benefits—beginning | $ | 3,094 | $ | 2,574 | |||||||
| Gross increases—tax positions in current period | 470 | 525 | |||||||||
| Decreases related to prior year positions | — | (5) | |||||||||
| Unrecognized tax benefits—ending | $ | 3,564 | $ | 3,094 | |||||||
The unrecognized tax benefit amounts are reflected in the determination of the Company’s deferred tax assets. If recognized, none of these amounts would affect the Company’s effective tax rate, since it would be offset by an equal corresponding adjustment in the deferred tax asset valuation allowance.
The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties on the Company’s balance sheets as of December 31, 2025 and 2024 and has not recognized interest and/or penalties in the statement of operations and comprehensive loss for the years ended December 31, 2025 and 2024.
The Company is not currently under examination in for Federal or state jurisdictions. All of the Company’s tax years remain effectively open in all jurisdictions to examination due to net operating loss carryforwards.
The following table lists the components of the payments for income taxes (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Federal | $ | — | $ | — | |||||||
| State | 1 | 1 | |||||||||
| Foreign | — | — | |||||||||
| Total net (refunds) payments | $ | 1 | $ | 1 | |||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.