11. Income Taxes

For the years ended December 31, 2025 and 2024, the Company recorded income tax benefit of $6,162 and income tax expense of $925, respectively. The net benefit was primarily the result of recognition of previously unrecognized tax benefits following a lapse in the statute of limitations.

As further described in Note 2, Summary of Significant Accounting Policies, the Company has elected to prospectively adopt the guidance in ASU 2023-09. The following table is a reconciliation of the Company's effective income tax rate to the statutory federal income tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09:

In 2025 and 2024 state and local income taxes in Massachusetts comprise the majority of the state and local income taxes, net of federal effect category. Income taxes paid to Massachusetts in 2025 were $210.

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The principal components of the Company’s deferred tax assets consisted of the following:

As required by the 2017 Tax Cut and Jobs Act, effective January 1, 2022, taxpayers could no longer immediately expense qualified research and development expenditures. Per the One Big Beautiful Bill Act, effective July 4, 2025, taxpayers are still required to capitalize foreign research and development expenditures, but now have the opportunity to deduct domestic research and development expenditures under IRC 174A. Further, the Company has elected to continue to amortize prior year domestic capitalized costs until the amortization of such costs is complete.

As of December 31, 2025, the Company had federal net operating losses of $202,771 and state net operating loss carryforwards of $219,340, which may be used to offset future tax liabilities. The Company has federal and state credit carryforwards of $17,377 and $1,976, respectively. The federal net operating losses and research and development tax credits begin to expire in 2034.

Management has evaluated the positive and negative evidence bearing up the realizability of the Company’s deferred tax assets. Based on the Company’s projected net operating losses, for 2026 and beyond, the Company determined that it is more likely than not that it will not recognize the benefits of the deferred tax assets. As a result, the Company has recorded a full valuation allowance of approximately $162,328 at December 31, 2025.

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation.

The following table presents a reconciliation of the total change in the valuation allowance for the year ended December 31, 2025:

Under the provisions of Sections 382 and 383 of the Internal Revenue Code (“IRC”), net operating loss and credit carryforwards and other tax attributes may be subject to limitation if there has been a significant change in ownership of the Company, as defined by the IRC.

The Company performed an analysis for the years ended December 31, 2025 and 2024 pursuant to Section 382 of the IRC to determine whether any limitations might exist on the utilization of net operating losses and other tax attributes. Based on this analysis, the Company has determined that there was no impact on the Company's ability to utilize net operating losses or credit carryforwards. To the extent that the Company raises additional equity financing or other changes in the ownership interest of significant stockholders occurs, tax attributes may become subject to an annual limitation. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The Company files federal and various state income tax returns. The statute of limitations for assessment by the Internal Revenue Service (“IRS”), and state tax authorities remains open for the tax year ended December 31, 2014 and tax years ending after December 31, 2021. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the IRS or state tax authorities to the extent utilized in a future period. No federal or state tax audits are currently in process.

The Company evaluates tax positions for recognition using a more-likely-than-not recognition threshold, and those tax positions eligible for recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon the effective settlement with a taxing authority that has full knowledge of all relevant information.