Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Loss before income taxes for U.S and non-U.S operations was as follows: 

	Year Ended December 31,
	2020		2019		2018
U.S. income (loss)	$	2,767	$	(9,632)	$	(8,056)
Non U.S. income (loss)	97		(33)		(81)
	$	2,864	$	(9,665)	$	(8,137)

A reconciliation of income taxes computed using the federal statutory rate to the taxes reported in the consolidated statements of operations is as follows: 

	Year Ended December 31,
(In thousands)	2020			2019			2018
Income (loss) before income taxes	$	2,864		$	(9,665)		$	(8,137)
Federal statutory rate	21		%	21		%	21		%
Taxes computed at federal statutory rate	601			(2,030)			(1,709)
State and local income taxes	200			(484)			(385)
Nondeductible share-based compensation	437			(1,329)			(605)
Federal and state rate change	249			(164)			839
Research and orphan drug credits	(8,827)			—			—
Other	132			(49)			172
Change in valuation allowance	7,388			4,056			1,688
Reported income taxes	$	180		$	—		$	—

Deferred tax assets (liabilities) consist of the following:

	Year Ended December 31,
(In thousands)	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	8,411	$	10,542
Employee benefits and stock compensation	5,692		4,329
Research and development costs	6,411		7,851
Intangible assets	3,279		4,350
Operating lease liability	13,687		7,245
Inventory reserve	3,813		3,303
Tax credit carryforward	10,085		—
Other, net	38		119
Total deferred tax assets	51,416		37,739
Less: valuation allowance	(37,379)		(29,991)
Total net deferred tax assets	14,037		7,748
Deferred tax liabilities:
Right of use asset	(13,463)		(7,143)
Fixed assets	(574)		(605)
Total net deferred tax liabilities	(14,037)		(7,748)
Net deferred tax assets and liabilities	$	—	$	—

For the year-ended December 31, 2020, we recorded income tax expense as a result of taxable income in certain states where the net operating loss carryforwards and related deferred tax assets have been fully utilized. As of December 31, 2020, the Company’s U.S. federal and state tax net operating loss carryforwards available to offset future profits, after considering the annual Section 382 limit described below, are $32.3 million and $21.3 million, respectively. These net operating loss carryforwards will expire between 2021 and 2039 with the exception of the federal net operating loss generated in 2018. The federal net operating loss of $1.5 million generated in 2018 can be carried forward indefinitely. The projected annual limitation on the use of the net operating losses that existed prior to September 17, 2014 as a result of our change in control in 2014 per Section 382 of the Internal Revenue Code is $0.8 million. As a result, a significant portion of the net operating losses and tax credit carryforwards will expire prior to their utilization, regardless of the level of future profitability. As of December 31, 2020, the Company’s U.S. federal tax credit carryforwards available to offset future profits are $10.1 million. During 2020, the Company determined to pursue certain available tax credits and performed a research and development and orphan drug credit tax studies. As a result of completion of these studies it was determined that the Company now has a sufficient basis to claim the credits and has recognized a tax credit carryforward in the current period. These credit carryforwards will expire between 2034 and 2040.

In accordance with the accounting guidance for income taxes, the Company estimated whether recoverability of its deferred tax assets is “more likely than not,” based on forecasts of taxable income in the related tax jurisdictions. In this estimate, the Company uses historical results, projected future operating results based upon approved business plans, eligible carry forward periods, tax planning opportunities and other relevant considerations. Based on these factors, including historical losses incurred by the Company, a full valuation allowance for the deferred tax assets, including the deferred tax assets for the aforementioned net operating losses and credits, has been provided since they are not more likely than not to be realized. If the Company continues to achieve profitability, these deferred tax assets may be available to offset future income taxes and the valuation could be released. The change in the valuation allowance was an increase of $7.4 million and $4.1 million for the years ended December 31, 2020 and 2019, respectively.

The Company assesses uncertain tax positions in accordance with the guidance for accounting for uncertain tax positions. This pronouncement prescribes a recognition threshold and measurement methodology for recording within the financial statements uncertain tax positions taken, or expected to be taken, in the Company’s income tax returns. To the extent the uncertain tax positions do not meet the “more likely than not” threshold, the Company has derecognized such positions. To the extent the uncertain tax positions meet the “more likely than not” threshold, the Company has measured and recorded the highest probable benefit, and have established appropriate reserves for benefits that exceed the amount likely to be sustained

upon examination. The Company currently has not recorded any uncertain tax positions and does not anticipate that the unrecognized tax benefits will significantly increase or decrease within the next twelve months.

The Company files U.S. federal and state income tax returns with varying statute of limitations. During the year-ended December 31, 2020 examinations by U.S. tax authorities have been completed for 2017 and 2018. Due to the Company’s net operating loss carryforwards, federal income tax returns from incorporation are still subject to examination. The Company files in several state tax jurisdictions and are subject to examination in years ranging from incorporation to 2020.