Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.8.0.1
Income Taxes
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
9. Income Taxes
 
There was no income tax expense for the years ended December 31, 2017 and 2016 due to the Company’s net losses. The Company’s tax expense differs from the “expected” tax expense for the years ended December 31, 2017 and 2016 (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):
 
 
 
2017
 
2016
 
Computed “expected” tax-benefit – Federal
 
$
(5,267)
 
$
(9,453)
 
Computed “expected” tax-benefit – State
 
 
(613)
 
 
(1,101)
 
Adjustment of “expected” tax-benefit to actual
 
 
(2)
 
 
(431)
 
Meals, entertainment and other
 
 
10
 
 
10
 
Non-deductible stock-based compensation
 
 
502
 
 
574
 
Fair Market Value Adjustment – Warrants
 
 
(4,076)
 
 
(4,332)
 
Impact of U.S. tax reform
 
 
21,555
 
 
-
 
Change in valuation allowance
 
 
(12,109)
 
 
14,733
 
 
 
$
 
$
 
 
The effects of temporary differences that gave rise to significant portions of deferred tax assets at December 31, 2017 and 2016 are as follows (in thousands ):
 
 
 
2017
 
2016
 
Deferred tax assets:
 
 
 
 
 
 
 
Stock issued for services
 
$
1,730
 
$
1,861
 
Accrued compensation
 
 
164
 
 
119
 
Stock issued for acquisition of program
 
 
1,202
 
 
1,576
 
Stock issued for license agreement
 
 
1,947
 
 
3,147
 
Stock issued for milestone payment
 
 
301
 
 
478
 
Amortizable license fee
 
 
6
 
 
9
 
Net operating loss carry-forward
 
 
40,248
 
 
50,517
 
Total gross deferred tax assets
 
 
45,598
 
 
57,707
 
Less: valuation allowance
 
 
(45,598)
 
 
(57,707)
 
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. Upon completion of our 2017 U.S. income tax return in 2018 we may identify additional remeasurement adjustments to our recorded deferred tax assets. We will continue to assess our provision for income taxes as future guidance is issued but do not currently anticipate significant revisions will be necessary. 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, 2017, the Company has a net operating loss carry-forward of approximately $156.4 million available to offset future taxable income expiring through 2037. 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, 2017 was approximately $45.6 million. The net change in valuation allowance during the year ended December 31, 2017 was a decrease of approximately $12.1 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, 2017.