Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.10.0.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
9. Income Taxes
 
There was no income tax expense for the years ended December 31, 2018 and 2017 due to the
Company
’s net losses. 
The Company’s tax expense differs from the “expected” tax expense for the years ended December 31, 2018 and 2017 (computed by applying the Federal corporate tax rate of 21% to loss before taxes and 4.74% for blended state income tax rate, the blended rate used was 25.74%), 
as follows (in thousands):
 
 
 
2018
 
 
2017
 
Computed “expected” tax-benefit – Federal
 
$
(2,818
)
 
$
(5,267
)
Computed “expected” tax-benefit – State
 
 
(636
)
 
 
(613
)
Adjustment of “expected” tax-benefit to actual
 
 
19
 
 
 
(2
)
Meals, entertainment and other
 
 
3
 
 
 
10
 
Non-deductible stock-based compensation
 
 
266
 
 
 
502
 
Fair Market Value Adjustment – Warrants
 
 
(1,051
)
 
 
(4,076
)
Impact of U.S. tax reform
 
 
-
 
 
 
21,555
 
Change in valuation allowance
 
 
4,217
 
 
 
(12,109
)
 
 
$
 
 
$
 
 
The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2018 and 2017 are as follows (
in thousands
):
 
 
 
2018
 
 
2017
 
Deferred tax assets:
 
 
 
 
 
 
 
 
Stock issued for services
 
$
1,998
 
 
$
1,730
 
Accrued compensation
 
 
38
 
 
 
164
 
Stock issued for acquisition of program
 
 
1,224
 
 
 
1,202
 
Stock issued for license agreement
 
 
1,760
 
 
 
1,947
 
Stock issued for milestone payment
 
 
278
 
 
 
301
 
Amortizable license fee
 
 
5
 
 
 
6
 
Net operating loss carry-forward
 
 
44,512
 
 
 
40,248
 
Total gross deferred tax assets
 
 
49,815
 
 
 
45,598
 
Less: valuation allowance
 
 
(49,815
)
 
 
(45,598
)
Total net deferred tax assets
 
$
 
 
$
 
 
The Tax Cuts and Jobs Act (the Tax Act) was signed into law on December 22, 2017. The Tax Act changed many aspects of U.S. corporate income taxation and included reduction of the corporate income tax rate from 35% to 21%, implementation of a territorial tax system and imposition of a tax on deemed repatriated earnings of foreign subsidiaries. We recognized the tax effects of the Tax Act in the year ended December 31, 2017 and recorded $21.6 million in tax expense which relates almost entirely to the remeasurement of deferred tax assets to the 21% tax rate. ASC 740 requires the Company to record the effects of a tax law change in the period of enactment, however, shortly after the enactment of the Tax Act, the SEC staff issued SAB 118, which allows the Company to record a provisional amount when it does not have the necessary information available, prepared, or analyzed in reasonable detail to complete its accounting for the change in the tax law. The measurement period ends when the Company has obtained, prepared and analyzed the information necessary to finalize its accounting, but cannot extend beyond one year. At December 31, 2018, the Company has a net operating loss carry-forward of approximately $172.9
 million available to offset future taxable income. The Company’s pre-2018 net operating losses expire on various dates through 
2037 
while the net operating loss carry-forward originating in the 2018 year carry-forward indefinitely. 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, 2018 was approximately $49.8 million. The net change in valuation allowance during the year ended December 31, 2018 was an increase of approximately $4.2 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, 2018.