v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company’s operations and income tax components are solely in the United States. From inception through 2025, the Company has only generated pretax losses in the United States and has not generated any pretax income or loss outside of the United States. The Company did not record a provision (benefit) for income taxes for the years ended December 31, 2025 and 2024. The Company accounts for income taxes in accordance with ASC 740, Income Taxes, which requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance.
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, the reconciliation of taxes at the federal statutory rate to our effective tax rate for the year ended December 31, 2025 was as follows:
(in thousands, except for percentages)AmountPercent
U.S. Federal Statutory Tax Rate$(4,579)21.0 %
Tax Credits:
Research and development tax credit(1,187)5.4 %
Change in valuation allowance5,826 (26.7)%
Nondeductible items:
Executive compensation - Section 162(m) limitation254 (1.2)%
Stock-based compensation(556)2.6 %
Nondeductible interest expense95 (0.4)%
Other147(0.7)%
Effective tax rate $— — %
A reconciliation of the federal statutory rate to the Company’s effective tax rate for the year ended December 31, 2024 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
Tax at federal statutory rate21.0 %
State taxes, net of federal benefit6.4 %
Research and development tax credit5.1 %
Stock-based compensation5.5 %
Nondeductible interest expense(2.0)%
FIN 48 reserve(1.2)%
Change in valuation allowance(21.8)%
Federal net operating loss expiration(10.2)%
Other(2.8)%
Effective tax rate— %
The tax effects of temporary differences that give rise to significant components of the deferred tax assets and liabilities are as follows:
December 31,
(in thousands)
2025
2024
Deferred tax assets:
Net operating loss carryforwards$46,029 $42,043 
Research and development credits16,805 14,903 
Research and development expenditures, capitalized for tax12,073 12,283 
Fixed assets and inventory— 28 
Accruals and reserves1,980 1,399 
Interest expense carryforward6,709 5,747 
Operating lease liability3,076 3,515 
Other1,698 1,281 
Gross deferred tax assets88,370 81,199 
Deferred tax liabilities:
Operating lease right-of-use asset(2,607)(3,014)
Fixed assets and inventory(53)— 
Total deferred tax liabilities(2,660)(3,014)
Valuation allowance(85,710)(78,185)
Net deferred tax assets$— $— 
Beginning January 1, 2022, the Tax Cuts and Jobs Act, or the Tax Act, eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to Internal Revenue Code Section 174. The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses.
On July 4, 2025, the One, Big, Beautiful Bill Act, or OBBBA, was enacted in the United States. The OBBBA includes several significant tax provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company will no longer be required to capitalize its domestic research and development expenditures under Section 174 of the Internal Revenue Code beginning with the tax year ended December 31, 2025. The Company evaluated the impact of the OBBBA and determined that it did not have a material impact on the Company’s consolidated financial statements for the year ended December 31, 2025 other than the change in domestic research and experimental costs.
The Company recognizes deferred income taxes for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes, as well as for tax attribute carryforwards. The Company regularly evaluates the positive and negative evidence in determining the realizability of its deferred tax assets. Based upon the weight of available evidence, which includes the Company’s historical operating performance and reported cumulative net losses since inception, the Company maintained a full valuation allowance on the net deferred tax assets as of December 31, 2025 and 2024. The Company intends to maintain a full valuation allowance on its deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance. The valuation allowance increased by $7.5 million during the year ended December 31, 2025 primarily resulting from $7.2 million increase in gross deferred tax assets net of a $0.3 million decrease in deferred tax liabilities. The valuation allowance increased by $5.9 million during the year ended December 31, 2024 primarily resulting from $5.5 million increase in gross deferred tax assets net of a $0.4 million decrease in deferred tax liabilities.
As of December 31, 2025, the Company had net operating loss, or NOL, carryforwards of $166.6 million and $181.5 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The federal and state NOL carryforwards begin expiring in 2026. As of December 31, 2025, the
amount of federal NOL carryforwards that does not expire is $129.2 million (subject to certain utilization limitations).
As of December 31, 2025, the Company had research and development credit carryforwards of $6.8 million and $15.2 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. The federal credit carryforwards begin expiring in 2036 and the state credits carry forward indefinitely.
Utilization of the Company’s NOL and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change provisions included in the Internal Revenue Code, or Section 382, and similar state provisions. An annual limitation may result in the expiration of NOL and credit carryforwards before utilization. The Company conducted Section 382 studies as of 2016, 2021, and 2024, and has determined that it experienced Section 382 ownership changes in 2016 and in 2021, and no change in 2024. The 2016 ownership change resulted in permanent limitations of its NOL and credit carryforwards. The 2021 ownership change did not result in permanent limitations of its NOL or credit carryforwards. It has been determined that $226.8 million and $150.7 million of federal and state NOL carryforwards, respectively, have been permanently limited and will expire unutilized. It has also been determined that $10.4 million of federal research and development credits have been permanently limited and will expire unutilized. The gross deferred tax assets disclosed above exclude NOL and credit carryforwards that are expected to expire due to the Section 382 limitation.
As of December 31, 2025, the Company had unrecognized tax benefits of $2.3 million related to $6.8 million and $15.2 million of federal and state research and development tax credit carryforwards, respectively. The unrecognized tax benefits, if recognized, would not have an impact on the Company's effective tax rate, due to the valuation allowance. It is unlikely that the amount of unrecognized tax benefits will significantly change over the next twelve months. No liability related to uncertain tax positions is recorded in the financial statements.
A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows:
Year Ended December 31,
(in thousands)
2025
2024
Beginning balance$2,085 $1,730 
Increase in balance related to tax positions taken during the current year232 355 
Ending balance$2,317 $2,085 
It is the Company’s policy to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. The Company determined that no accrual for interest and penalties related to unrecognized tax benefits was required as of December 31, 2025 and 2024.
All of the Company’s tax years will remain open for examination by the federal and state authorities for 3 and 4 years, respectively, from the date of utilization of its tax attributes.