Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

12.Income Taxes

The Company’s consolidated financial statements include a total tax benefit of $4.7 million and $3.1 million on loss before taxes of $67.5 million and $36.0 million for the years ended December 31, 2022 and 2021, respectively. The income tax benefit consisted of the following (dollars in thousands):

	Years Ended December 31,
	2022			2021
Current (benefit) expense
U.S.	$	(4,700	)	$	(4,188	)
Non-U.S		—			1,100
Total current (benefit)	$	(4,700	)	$	(3,088	)

Reconciliations of the differences between the benefit for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows (dollars in thousands):

	2022						2021
	Amount			Percent of Pretax Income			Amount			Percent of Pretax Income
Income taxes from continuing operations at statutory rate	$	(13,176	)		21.0	%	$	(7,781	)		21.0	%
State income taxes		(319	)		0.5	%		(1,144	)		3.1	%
State effect of permanent items		(114	)		0.2	%		(906	)		2.4	%
Foreign withholding taxes		—			—			1,100			(3.0	)%
Stock-based compensation		123			(0.2	)%		114			(0.3	)%
Deferred rate change		379			(0.6	)%		339			(0.9	)%
Warrants issuance		(4,960	)		7.9	%		(6,622	)		17.9	%
Other		713			(1.2	)%		(489	)		1.3	%
NOL sale		237			(0.4	)%		214			(0.6	)%
R&D credit adjustment		—			—			—			—
Increase in valuation allowance		12,417			(19.8	)%		12,087			(32.6	)%
Total income tax (benefit)	$	(4,700	)		7.4	%	$	(3,088	)		8.3	%

The components of deferred tax assets and liabilities as of December 31, 2022 and 2021 are as follows (in thousands):

	December 31,
	2022			2021
Noncurrent deferred tax assets (liabilities)
Accrued expenses	$	578		$	1,264
Stock-based compensation		2,675			2,554
Lease liability		689			789
Other		4,398			(757	)
Net operating loss carryforwards		88,363			80,453
Research and development credits		6,839			6,839
Total deferred tax assets		103,542			91,142
Valuation allowances		(103,542	)		(91,142	)
Net deferred tax assets	$	—		$	—

As of December 31, 2022 and 2021, the Company had available federal net operating loss (“NOL”) carryforwards of approximately $405.0 million and $348.4 million, respectively, and state and net operating loss carryforwards of approximately $116.8 million and $186.3 million, respectively. Approximately $169.6 million of the federal NOLs can be carried forward to future tax years and expire at various times through 2037. The federal NOLs generated in December 31, 2022 and 2021 of approximately $56.6 million and $55.7 million, respectively, are carried forward indefinitely and do not expire. The Company’s state and net operating loss carryforwards began to expire in 2019. As of December 31, 2022, the Company had available federal research and development credit carryforwards of $6.6 million which began to expire in 2022.

The New Jersey Technology Business Tax Certificate Transfer (NOL) program, administered by the New Jersey Economic Development Authority, enables approved biotechnology companies to sell their unused net operating losses (“NOLs”) and research and development tax credits to unaffiliated, profitable corporate taxpayers in the State of New Jersey (“NJ”) up to a maximum lifetime benefit of $20.0 million per business. As of December 31, 2022, the Company has received approximately $18.8 million under the program. In February 2022 and April 2021, the Company received cash receipts of $4.7 million and $4.1 million, respectively, from the sale of its NJ state NOLS. The Company recognized an income tax benefit of $4.7 million and $4.1 million for the years ended December 31, 2022 and 2021, respectively, in the statement of operations.

As part of the license agreement with Hansoh, the Company and Hansoh agreed to make reasonable efforts to account for applicable taxes, fees, duties, levies, or similar amounts imposed on net income, franchise taxes and profits arising directly or indirectly from the activities of the license agreement. To the extent Hansoh is required by applicable laws to withhold or deduct any tax on any payment to the Company, Hansoh agreed to make certain increases on payments to the Company to ensure that the Company receives a sum equal to what the Company would have received had there been no deduction or withholding. As a result, the Company has recorded revenue and tax withholding expense primarily associated with the up-front payment received by the Company on a gross basis. For the year ended December 31, 2021, the Company recognized $1.1 million in license agreement revenue and $1.1 million in income tax expense to account for the tax withholding expense primarily on the $10.0 million up-front that the Company is responsible to remit under applicable tax law.

On December 22, 2017, the “Tax Cuts and Jobs Act” was signed into law. The tax reform has the following effects on the Company: (1) permanently reduces the maximum corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, (2) allows temporary 100% expensing for certain business assets and property placed in service after September 27, 2018 and before January 1, 2023, (3) disallows NOL carrybacks but allows for the indefinite carryforward of those NOLs which applies to losses arising in tax years beginning after December 31, 2018 and, (4) limits NOL deductions for each year equal to the lesser of the available carryover or 80% of a taxpayer’s pre-NOL deduction taxable income. This applies to losses arising in tax years ending on or after December 31, 2017. As of December 31, 2022 and 2021, the Company has concluded that it is more likely than not that the Company will not realize the benefit of its deferred tax assets due to its history of losses. Accordingly, the net deferred tax assets have been fully reserved.

In accordance with Section 382 of the Internal Revenue Code of 1986, as amended, a change in equity ownership of greater than 50% within a three-year period results in an annual limitation on the Company’s ability to utilize its NOL carryforwards created during the tax periods prior to the change in ownership. The Company has determined that ownership changes have occurred and as a result, a portion of the Company’s NOL carryforwards are limited. Because the Company has incurred cumulative net operating losses since inception, all tax years remain open to examination by U.S. federal and state income tax authorities.

The Company applies ASC 740-10-25-5, Income Taxes, formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, as amended, on January 1, 2009. The difference between the tax benefit recognized in the financial statements and the tax benefit claimed in the tax return is referred to as an unrecognized tax benefit.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits as of December 31, 2022 and 2021 (in thousands):

	December 31,
	2022		2021
Unrecognized tax benefit—January 1	$	436	$	436
Additions for tax positions of current period		—		—
Additions for tax positions of prior periods		—		—
Deferred rate change		—		—
Unrecognized tax benefit—December 31	$	436	$	436

None of the unrecognized tax benefits would, if recognized, affect the effective tax rate because the Company has recorded a valuation allowance to fully offset federal and state deferred tax assets. The Company has no tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the coming year. The Company has $0 provided for interest and penalties associated with uncertain tax positions.