Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The tax effect of temporary differences between the tax bases of assets and liabilities and their financial reporting amounts that give rise to the deferred tax assets and deferred tax liabilities as of December 31, 2021 and 2020 are as follows:

	December 31,
	2021		2020
Deferred tax assets:
Accounts receivable	$	149	$	112
Inventory	100		4
Accrued expenses	309		353
NOL carryforwards	28,722		22,569
Interest limitation imposed by the TJCA	9,022		7,235
Stock Compensation	5,003		4,051
Other	2,122		1,229
Sale of Future Revenue	16,595		14,444
Property and equipment	2,566		2,380
Orphan Drug and R&D Tax Credits	5,490		5,851
Accrued debt fees	726		—
Intangible assets	2,547		—
	73,351		58,228
Deferred tax liabilities:
Intangible assets	—		(551)
481(a) adjustment	(14)		—
Prepaid expenses	(807)		(908)
	(821)		(1,459)
Valuation Allowance	(72,530)		(56,769)
Net deferred tax asset/(liability)	$	—	$	—

At December 31, 2021 and 2020, the Company had federal net operating loss carryforwards of $105,722 and $81,566, respectively, a significant portion of which carryforward for an indefinite period. At December 31, 2021 and 2020, the Company also had state net operating loss carryforwards of $93,304 and $74,379, respectively, which begin expiring in 2034. As a result of the December 2017 U.S. Tax Cuts and Jobs Act (“TCJA”), updated regulations under section 163(j) create new limitations on deductible interest expense. For the year ended December 31, 2021, the Company’s interest expense deduction under 163(j) will be limited for tax purposes based on a calculation of 30% of its EBITDA on a tax basis. On March 27,2020, the Coronavirus Aid, Relief and Economic Security Act, which we refer to as the "U.S. CARES ACT," was signed into law. The U.S. CARES Act, among other things, includes provisions related to net operating loss carryback periods, modifications to the interest deduction limitation. The U.S. CARES Act increased the adjusted taxable income limitation from 30% to 50% for business interest deductions for tax years beginning in 2019 and 2020. This modification increased the allowable interest expense deduction and resulted in additional net operating loss (NOL) for the year 2019 and lower current taxable income (before NOL utilization) for the Company. Additionally, the U.S. CARES Act allowed us to fully offset 2020 taxable income with prior years' NOL carried forward. The Company has determined, based upon available evidence, that is more likely than not that the net deferred tax asset will not be realized and accordingly, has provided a full valuation allowance against its net deferred tax assets. Valuation allowances of $72,530, and $56,769 have been established at December 31, 2021 and 2020, respectively. The Company may also be subject to the net operating loss

utilization provisions of Section 382 of the Internal Revenue Code due to ownership changes. As a result, the use of NOL carry forwards from the current and prior periods are subject to annual limitations.

Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax provisions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that there were no uncertain positions as of December 31, 2021 and 2020. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for the years ended December 31, 2021 and 2020. The Company’s U.S. federal and state net operating losses have occurred since its election to treat as a C Corporation in 2017 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.   In early 2020, the U.S. Internal Revenue Service began an examination of the Company’s federal income tax return for 2018 which was concluded in 2021 with no significant adjustments required.

A reconciliation of income tax benefit and the amount computed by applying the statutory federal income tax rates of 21% to loss before taxes for the year ended December 31, 2021 and 2020, respectively, as follows:

	Year Ended December 31,
	2021		2020
Income taxes at statutory rate	21.00	%	21.00	%
Increase (decrease) resulting from:
State income tax	5.28		6.81
Permanent differences	(0.15)		(0.12)
Research & development credit	0.12		2.35
Return to provision	(0.63)		—
Valuation allowance	(22.37)		(30.04)
Other	(3.37)		—
Effective tax rate	(0.12)	%	0.00	%

On July 1, 2018, the New Jersey governor signed into law a bill which included significant changes to the New Jersey taxation of corporations. Chiefly, this legislation imposes a 2.5% surtax on taxpayers with allocated net income over $1 million for 2018 and 2019, and a 1.5% surtax for taxpayers with allocated net income over $1 million for 2020 and 2021. Subsequently, on September 29,2020, Assembly Bill 4721 extended the additional corporation business tax surtax of 2.5% for the tax years 2020 through 2023. In addition, the state is changing its filing requirements from separate entity reporting to combined reporting on a water’s edge basis. Further, there are changes to the state’s computation of its dividend received deduction and application of IRC section 163(j). The Company has considered these changes and does not believe this change in law will have a material impact due to availability of significant New Jersey NOL carryforwards to set off against future taxable income and a full valuation allowance against the net deferred tax assets.