Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of the provision for income taxes are as follows:

Expense classification:	Year Ended December 31,
	2023		2022
Current
Federal	$	245	$	—
State	—		—
Total	245		—
Deferred
Federal	—		—
State	—		—
Total	—		—
Provision for Income Tax	$	245	$	—

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, 2023 and 2022 are as follows:

	December 31,
	2023		2022
Deferred tax assets:
Accounts receivable	$	4	$	177
Inventory	345		449
Accrued expenses	73		1,063
NOL carryforwards	27,120		32,197
Interest limitation imposed by the TJCA	9,880		10,667
Stock Compensation	6,529		5,813
Deferred Revenue	7,662		2,326
Royalty Monetization	16,750		17,139
Property and equipment	2,756		2,576
Orphan Drug and R&D Tax Credits	4,805		5,625
Accrued debt fees	—		697
Intangible Assets	154		1,731
Section 174 R&D Capitalization	5,039		3,770
Royalty Obligations	3,520		—
Other	58		82
	84,695		84,312
Deferred tax liabilities:
481(a) adjustment	(193)		—
Prepaid expenses	(449)		(524)
	(642)		(524)
Valuation Allowance	(84,053)		(83,788)
Net deferred tax asset/(liability)	$	—	$	—

At December 31, 2023 and 2022, the Company had federal net operating loss carryforwards of $101,029 and $123,922, respectively, a significant portion of which carryforward for an indefinite period. At December 31, 2023 and 2022, the Company also had state net operating loss carryforwards of $104,478 and $104,238, 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, 2023, 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 the Company refers 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 the Company 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 $84,053, and $83,788 have been established at December 31, 2023 and 2022, 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.

The TCJA requires taxpayers to capitalize and amortize R&D expenditures under section 174 for tax years beginning after December 31, 2021. For the years ended December 31, 2023 and 2022, the capitalized R&D costs were $12.6 million and $16.6 million, respectively. The Company will amortize these costs for tax purposes over five years if the R&D was performed in the U.S. and over 15 years if the R&D was performed outside the U.S.

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, 2023 and 2022.

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, 2023 and 2022, respectively, as follows:

	Year Ended December 31,
	2023		2022
Income taxes at statutory rate	21.00	%	21.00	%
Increase (decrease) resulting from:
State income tax	4.00		4.23
Permanent differences	(0.43)		(0.20)
Tax credits	—		0.20
Valuation allowance	(26.53)		(20.69)
Return to provision	(3.28)		0.11
State rate change	(1.78)		(4.67)
FDII Deductions	3.80		—
Effective tax rate	(3.22)	%	(0.02)	%

The Company received an ERTC refund of $1,250. It is included in Interest income and other income, net on the December 31, 2023 Company's Consolidated Statements of Operations and Comprehensive Loss.