Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.21.1
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes

10.

Income Taxes

The Company’s consolidated financial statements include a total tax benefit of $3.1 million and zero on loss before taxes of $58.3 million and $53.7 million for the years ended December 31, 2020 and 2019, respectively, and was generated entirely in the United States and Australia. Reconciliations of the differences between the benefit for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows (dollars in thousands):

 

 

 

2020

 

 

2019

 

 

 

Amount

 

 

Percent of Pretax Income

 

 

Amount

 

 

Percent of Pretax Income

 

Income taxes from continuing operations at statutory rate

 

$

(12,250

)

 

 

21.0

%

 

$

(11,279

)

 

 

21.0

%

State income taxes

 

 

(4,108

)

 

 

7.0

%

 

 

(3,778

)

 

 

7.0

%

State effect of permanent items

 

 

78

 

 

 

(0.1

)%

 

 

285

 

 

 

(0.5

)%

Stock-based compensation

 

 

96

 

 

 

(0.2

)%

 

 

100

 

 

 

(0.2

)%

Deferred rate change

 

 

 

 

 

 

 

 

(905

)

 

 

1.6

%

Warrants issuance

 

 

131

 

 

 

(0.2

)%

 

 

733

 

 

 

(1.4

)%

Other

 

 

206

 

 

 

(0.3

)%

 

 

883

 

 

 

(1.5

)%

NOL sale

 

 

301

 

 

 

(0.5

)%

 

 

 

 

 

 

R&D credit adjustment

 

 

2

 

 

 

 

 

 

(2,760

)

 

 

5.1

%

Increase in valuation allowance

 

 

12,396

 

 

 

(21.3

)%

 

 

16,721

 

 

 

(31.1

)%

Total income tax benefit

 

$

(3,148

)

 

 

5.4

%

 

$

 

 

 

%

 

The components of deferred tax assets and liabilities as of December 31, 2020 and 2019 are as follows (in thousands):

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

Noncurrent deferred tax assets (liabilities)

 

 

 

 

 

 

 

 

Accrued expenses

 

$

148

 

 

$

107

 

Stock-based compensation

 

 

2,591

 

 

 

2,436

 

Lease liability

 

 

935

 

 

 

945

 

Other

 

 

(823

)

 

 

(856

)

Net operating loss carryforwards

 

 

70,936

 

 

 

58,073

 

Research and development credits

 

 

5,291

 

 

 

5,984

 

     Total deferred tax assets

 

 

79,078

 

 

 

66,689

 

Valuation allowances

 

 

(79,078

)

 

 

(66,689

)

Net deferred tax assets

 

$

 

 

$

 

 

 

As of December 31, 2020 and 2019, the Company had available federal net operating loss (“NOL”) carryforwards of approximately $294.4 million and $242.4 million, respectively, and state and net operating loss carryforwards of approximately $202.7 million and $178.2 million, respectively.  Approximately $169.6 million of the federal NOLs can be carried forward to future tax years and expire at various times through 2037. The federal NOLs generated in December 31, 2020 and 2019 of approximately $52.0 million and $47.5 million, respectively, are carried forward indefinitely and do not expire.  The Company’s state and net operating loss carryforwards began to expire in 2019.  As of December 31, 2020, the Company had available federal research and development credit carryforwards of $5.3 million which begin to expire in 2022.

The New Jersey Technology Business Tax Certificate Transfer (NOL) program, administered by the New Jersey Economic Development Authority, enables approved biotechnology companies to sell their unused net operating losses (“NOLs”) and research and development tax credits to unaffiliated, profitable corporate taxpayers in the State of New Jersey up to a maximum lifetime benefit of $20.0 million per business.   As of December 31, 2020, the Company has received approximately $9.9 million under the program.  In April 2020, the Company received a cash receipt of approximately $3.1 million, from the sale of its state NOLs and research and development credits and recognized an income tax benefit of $3.1 million  for the year ended December 31, 2020 in the statement of operations.  

On December 22, 2017, the “Tax Cuts and Jobs Act” was signed into law.  The tax reform has the following effects on the Company: (1) permanently reduces the maximum corporate income tax rate from 35% to 21% effective for tax years beginning after December 31, 2017, (2) allows temporary 100% expensing for certain business assets and property placed in service after September 27, 2018 and before January 1, 2023, (3) disallows NOL carrybacks but allows for the indefinite carryforward of those NOLs which applies to losses arising in tax years beginning after December 31, 2018 and, (4) limits NOL deductions for each year equal to the lesser of the available carryover or 80% of a taxpayer’s pre-NOL deduction taxable income. This applies to losses arising in tax years ending on or after December 31, 2017.  As of December 31, 2020 and 2019, the Company has concluded that it is more likely than not that the Company will not realize the benefit of its deferred tax assets due to its history of losses. Accordingly, the net deferred tax assets have been fully reserved.

 

In accordance with Section 382 of the Internal Revenue Code of 1986, as amended, a change in equity ownership of greater than 50% within a three-year period results in an annual limitation on the Company’s ability to utilize its NOL carryforwards created during the tax periods prior to the change in ownership. The Company has determined that ownership changes have occurred and as a result, a portion of the Company’s NOL carryforwards are limited.  Because the Company has incurred cumulative net operating losses since inception, all tax years remain open to examination by U.S. federal and state income tax authorities.

The Company applies ASC 740-10-25-5, Income Taxes, formerly FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, as amended, on January 1, 2009. The difference between the tax benefit recognized in the financial statements and the tax benefit claimed in the tax return is referred to as an unrecognized tax benefit.

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits as of December 31, 2020 and 2019 (in thousands):

 

 

 

December 31,

 

 

 

2020

 

 

2019

 

Unrecognized tax benefit—January 1

 

$

436

 

 

$

436

 

Additions for tax positions of current period

 

 

 

 

 

 

Additions for tax positions of prior periods

 

 

 

 

 

 

Deferred rate change

 

 

 

 

 

 

Unrecognized tax benefit—December 31

 

$

436

 

 

$

436

 

 

None of the unrecognized tax benefits would, if recognized, affect the effective tax rate because the Company has recorded a valuation allowance to fully offset federal and state deferred tax assets. The Company has no tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the coming year. The Company has $0 provided for interest and penalties associated with uncertain tax positions.