v3.25.4
Income Taxes
12 Months Ended
Dec. 31, 2024
Income Taxes [Abstract]  
Income Taxes

Note 13 — Income Taxes

 

Income taxes in the Company’s combined financial statements have been calculated on a separate tax return basis. The following table presents the principal reasons for the difference between the effective tax rate and the federal statutory income tax rate (in thousands):

 

   Year Ended December 31 
   2024   2023 
Tax benefit at U.S. federal statutory rate   21.00%   (1,941)   21.00%   (2,159)
State Tax, net of federal benefit   14.58%   (1,347)   0.14%   (14)
Permanent difference   (0.06)%   6    (0.06)%   6 
Prior-Year deferred taxes adjustment   0.32%   (30)   (0.57)%   58 
Change of valuation allowance   (35.84)%   3,312    (20.51)%   2,109 
Effective income tax rate   0.00%   
—
    0.00%   
—
 

 

The components of the provision for income taxes are as follows (in thousands):

 

   Year Ended
December 31,
 
   2024   2023 
Current:        
Federal  $
—
   $
—
 
State   
—
    
—
 
Foreign   
—
    
—
 
    
—
    
—
 
           
Deferred:          
Federal   (1,607)   2,127 
State and local   (1,705)   (18)
    (3,312)   2,109 
Less: change in valuation allowance   3,312    (2,109)
Total provision for income taxes  $
—
   $
—
 

 

Significant components of the Company’s deferred tax assets as of December 31, 2024 and 2023 were as follows (in thousands):

 

   Year Ended
December 31,
 
   2024   2023 
Deferred tax assets:        
Accrued expenses & other  $70   $38 
Depreciation and amortization   7    2 
Stock based compensation   52    38 
Convertible debt   93    5 
Capitalized R&D   1,549    1,542 
Net operating loss carryforward   32,173    29,033 
R&D credit carryforward   3,511    3,485 
Other   
—
    
—
 
    37,455    34,143 
Less: valuation allowance   (37,455)   (34,143)

 

No income tax expense was recorded during the year ended December 31, 2024 and 2023.

As of December 31, 2024, Profusa, Inc. had Federal and state net operating loss carryforwards of $114.8M and $116.3M, respectively. The Federal and state net operating loss carryforwards begin to expire in 2029. Federal net operating losses generated in tax years 2018 or thereafter have an indefinite carryforward period. The amount of Federal net operating loss that does not expire is $91.6 million.

 

As of December 31, 2024, Profusa, Inc. had Federal and California research credit carryforwards of $2.1M and $1.8M, respectively. The Federal tax credit carryforwards begin to expire in 2032. The state tax credit carryforwards carryforward indefinitely.

 

Management believes that, based upon a number of factors, which include the Company’s historical operating performance and accumulated deficit, it is more likely than not that the deferred tax assets will not be utilized. Therefore, the Company has recorded a full valuation allowance against its deferred tax assets.

 

Internal Revenue Code (IRC) section 382 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in stock ownership of a company. The annual limitation may result in the expiration of the Company’s net operating loss and tax credit carryforwards prior to utilization. The Company has not completed an IRC section 382 study as of December 31, 2024.

 

No liability related to uncertain tax positions is recorded in the financial statements.

 

The Company accrues for interest and penalties as part of income tax expense. As of December 31, 2024 and 2023, the Company has not accrued interest and/or penalties.

 

The Company files tax returns in the U.S. Federal, California and various other states. Due to the Company’s net operating losses, its Federal and state income tax returns remain subject to examination since inception. As of December 31, 2024, there are no ongoing tax examinations.

 

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). The act contains many tax incentives intended to assist companies and individuals during the COVID-19 outbreak. The Company received Paycheck Protection Program Loans during the years ended December 31, 2021 and December 31, 2020 of $1.3 million and $1.2 million, respectively. The Company had $1.4 million of Paycheck Protection Program loans outstanding as of December 31, 2024 and 2023.

 

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into federal law. IRA, among other things, imposes a nondeductible 1% excise tax after December 31, 2022 on the fair market value of certain stock that is “repurchased” by a publicly traded U.S. corporation or acquired by certain of its subsidiaries. The taxable amount is reduced by the fair market value of certain issuances of stock throughout the year. The Company does not expect this tax law change to have a material impact on its consolidated financial position; however, it will continue to evaluate its impact as further information becomes available. If average annual adjusted financial statement income exceeds $1 billion over a 3-taxable-year period, IRA also imposes a 15% corporate alternative minimum tax on adjusted financial statement income for taxable years beginning after December 31, 2022. The Company does not expect to incur this tax in the foreseeable future.

 

Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. The mandatory capitalization requirement increases our deferred tax assets and is fully offset with the valuation allowance.