Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.19.1
Income Taxes
 12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
Note 8 - Income Taxes
 
For financial reporting purposes, the Company calculated income tax provision and deferred income tax balances as if it was a separate entity and had filed its own separate tax return under Sub-Chapter C of the Internal Revenue Code. 
 
A reconciliation of the statutory U.S. federal rate to the Company’s effective tax rate is as follows:
 
 
 
For the year ended December 31,
 
 
2018
 
 
2017
 
Statutory federal income tax rate
 
 
21
%
 
 
35
%
State taxes, net of federal tax benefit
 
 
7
%
 
 
9
%
Non-deductible items
 
 
-
 
 
 
(2
)%
Credits
 
 
3
%
 
 
-
 
Federal tax rate change
 
 
-
 
 
(18
)%
State tax rate change
 
 
(2
)%
 
 
(1
)%
Other
 
 
(1
)%
 
 
(1
)%
Change in valuation allowance
 
 
(28
)%
 
 
(22
)%
Income taxes provision (benefit)
 
 
-
 
 
 
-
 
   
The components of the net deferred tax asset as of December 31, 2018 and 2017 are the following ($ in thousands):
 
 
 
For the year ended December 31,
 
 
 
2018
 
 
2017
 
Deferred tax assets:
 
 
 
 
 
 
 
 
Net operating loss carryovers
 
$
14,305
 
 
$
7,236
 
Stock compensation and other
 
 
1,427
 
 
 
697
 
Change in warrant liability
 
 
45
 
 
 
50
 
Amortization of license
 
 
6,258
 
 
 
6,424
 
Accruals and reserves
 
 
237
 
 
 
22
 
Startup costs
 
 
6
 
 
 
8
 
Tax credits
 
 
1,070
 
 
 
178
 
Total deferred tax assets
 
$
23,348
 
 
$
14,615
 
Less valuation allowance
 
 
(23,348
)
 
 
(14,615
)
Deferred tax assets, net of allowance
 
$
-
 
 
$
-
 
 
On December 22, 2017, “H.R.1”, formerly known as the “Tax Cuts and Jobs Act”, was signed into law. Among other items, H.R.1 reduces the federal corporate tax rate to 21% from the existing maximum rate of 35%, effective January 1, 2018. As a result, the Company has recorded a decrease related to deferred tax assets of $5.7 million, with a corresponding net adjustment to deferred income tax expense of $5.7 million for the year ended December 31, 2017.
 
The SEC staff issued Staff Accounting Bulletin 118 (“SAB 118”) to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Tax Act and allows the registrant to record provisional amounts during the measurement period.  The Company is in the process of analyzing the impact of the various provisions of the Tax Act. The Company expects to complete its analysis within the measurement period in accordance with SAB 118.
 
The Company has determined, based upon available evidence, that it is more likely than not that the net deferred tax asset will not be realized and, accordingly, has provided a full valuation allowance against its net deferred tax asset. A valuation allowance of approximately $23.3 million and $14.6 million, respectively, was recorded for the year ended December 31, 2018 and 2017.
 
As of December 31, 2018, the Company had federal and state net operating loss carryforwards of approximately $48.2 million and $63.6 million, respectively. The federal and state net operating loss carryforwards will begin to expire, if not utilized, by 2035 and 2035, respectively. Utilization of the net operating loss carryforward may be subject to an annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended and similar state provisions.
  
There are no significant items determined to be unrecognized tax benefits taken or expected to be taken in a tax return, in accordance with ASC 740 “Income Taxes” (“ASC 740”), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements, that have been recorded on the Company’s financial statements for the period ended December 31, 2018. The Company does not anticipate a material change to unrecognized tax benefits in the next twelve months.
 
Additionally, ASC 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for the period ended December 31, 2018. 
 
The federal and state tax returns for the years ended December 31
, 2017, 2016, and 2015 are currently open for examination under the applicable federal and state income tax statues of limitations.