Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.6.0.2
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
9. Income Taxes
 
There was no income tax expense for the years ended December 31, 2016 and 2015 due to the Company’s net losses. The Company’s  tax expense differs from the “expected” tax expense for the years ended December 31, 2016 and 2015 (computed by applying the Federal Corporate tax rate of 34% to loss before taxes and 3.96% for blended state income tax rate, the blended rate used was 37.96%), as follows ( in thousands ):  
 
 
 
2016
 
2015
 
Computed “expected” tax-benefit – Federal
 
$
(9,453)
 
$
(14,870)
 
Computed “expected” tax-benefit – State
 
 
(1,101)
 
 
(1,732)
 
Adjustment of “expected” tax-benefit to actual
 
 
(431)
 
 
199
 
Meals, entertainment and other
 
 
10
 
 
8
 
Non-deductible stock-based compensation
 
 
574
 
 
877
 
Fair Market Value Adjustment – Warrants
 
 
(4,332)
 
 
1,447
 
Change in valuation allowance
 
 
14,733
 
 
14,071
 
 
 
$
 
$
 
 
The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2016 and 2015 are as follows ( in thousands ):
 
 
 
2016
 
2015
 
Deferred tax assets:
 
 
 
 
 
 
 
Stock issued for services
 
$
1,861
 
$
922
 
Accrued compensation
 
 
119
 
 
105
 
Stock issued for acquisition of program
 
 
1,576
 
 
1,337
 
Stock issued for license agreement
 
 
3,147
 
 
2,308
 
Stock issued for milestone payment
 
 
478
 
 
-
 
Amortizable License Fee
 
 
9
 
 
-
 
Net operating loss carry-forward
 
 
50,517
 
 
38,302
 
Total gross deferred tax assets
 
 
57,707
 
 
42,974
 
Less: valuation allowance
 
 
(57,707)
 
 
(42,974)
 
Total net deferred tax assets
 
$
 
$
 
 
At December 31, 2016, the Company has a net operating loss carry-forward of approximately $133.3 million available to offset future taxable income expiring through 2035. However, utilization of these net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code.
 
The valuation allowance at December 31, 2015 was approximately $42.9 million. The net change in valuation allowance during the year ended December 31, 2016 was an increase of approximately $14.7 million. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2016.
 
ASC 740-10 “ Accounting for Uncertain Tax Positions ” prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition.
 
As of December 31, 2016 and 2015, the Company had no unrecognized tax benefits and no adjustments to liabilities or operations were required under ASC 740-10. The Company’s practice was and continues to be to recognize interest and penalty expenses related to uncertain tax positions in income tax expense, which was zero for the years ended December 31, 2016 and 2015. The Company files United States federal and various state income tax returns. 
 
The Company does not anticipate that it is reasonably possible that unrecognized tax benefits as of December 31, 2016 will significantly change within the next 12 months.