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 Taxes

10. Income Taxes

Deferred income tax assets and liabilities are recognized for the differences between the financial statement and income tax reporting basis of assets and liabilities based on currently enacted rates and laws.

 

A reconciliation of statutory tax expense to actual tax expense is as follows:

 

     Year Ended December 31,  
  

(Amounts in Thousands)

   2017     

 

     2016       2015  
     

 

 

       

Federal benefit at statutory rate of 34%

   ($ 8,833       ($ 4,109    ($ 2,002

State Taxes (Net of Fed. Benefit)

     3           —        —  

Nondeductible expenses

     (154         325        237  

Recognized R&D tax credits

     —             (418      —  

Other credits generated

     —           (58      —  

Deferred rate change

     3,346           —        —  

Change in valuation allowance

     5,638           4,260        1,765  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total income tax

   $ —           $ —      $ —  
  

 

 

    

 

 

    

 

 

    

 

 

 

The total valuation allowance increased by $5.6 million, $4.3 million and 1.8 million for 2017, 2016 and 2015, respectively.

Deferred assets consist of the following:

 

     Year Ended December 31,  

(Amounts in Thousands)

   2017      2016  
     

Net operating loss

     9,252        8,974  

Stock-based compensation

     2,691        —    

Financing lease obligation

     2,131        —    

Credits

     735        592  

Accrued expenses

     576        574  

Other

     8        81  
  

 

 

    

 

 

 

Total deferred tax assets

     15,393        10,221  

Property and equipment

     (2,600      (53

Deferred revenue

     (1      9  
  

 

 

    

 

 

 

Total deferred tax liabilities

     (2,601      (44

Less valuation allowance

     (12,792      (10,177
  

 

 

    

 

 

 

Total

   $ —        $ —    
  

 

 

    

 

 

 

The cumulative net operating loss (NOLs) available to offset future income for federal and state reporting purposes was $41.6 million, $24.7 million and $14.9 million at December 31, 2017, 2016 and 2015, respectively. Federal and state net operating loss and credit carryforwards will begin to expire in 2032. Due to potential ownership changes that may have occurred or would occur in the future, IRC Section 382 may place additional limitations on the Company’s ability to utilize the net operating loss carryforward.

The net deferred tax assets have a valuation allowance to reserve against those deferred tax assets that the Company believes are more likely than not to not be realized. In the event that the Company determines that a valuation allowance is no longer required, any benefits realized from the use of the NOLs and credits acquired will reduce its deferred income tax expense. In assessing the recoverability of the deferred tax assets, management considers whether it is more likely than not that a portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As such, the Company has recorded a valuation allowance to offset all of its deferred tax assets due to the uncertainty that enough taxable income will be generated in the taxing jurisdiction to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred tax assets in the accompanying financial statements.

 

The Company has recognized no material uncertain tax positions as of December 31, 2017. The Company files income tax returns in the U.S federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S federal or state and local income tax examinations by tax authorities for years before 2013. It is difficult to predict the final timing and resolution of any particular uncertain tax position. Based on the Company’s assessment of many factors, including past experience and complex judgements about future events, the Company does not currently anticipate significant changes in its uncertain tax positions over the next 12 months.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act tax reform legislation. This legislation makes significant change in U.S. tax law including a reduction in the corporate tax rates, changes to net operating loss carryforwards and carrybacks, and a repeal of the corporate alternative minimum tax. The legislation reduced the U.S. corporate tax rate from the current rate of 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liability at the enacted rate, which the Company has concluded provisionally had a net reduction in its net deferred tax assets of $3.4 million. This revaluation didn’t have any income tax expense impact due to the full valuation allowance. The other provisions of the Tax Cuts and Jobs Act did not have a material impact on the 2017 financial statements.

In March 2016, the FASB issued guidance within ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The amendments in ASU 2016-09 to Topic 718, Compensation—Stock Compensation, require recognition of all excess tax benefits and tax deficiencies through income tax expense or benefit in the income statement. The amendments in this Update are effective for annual periods beginning after December 15, 2016. Effective January 1, 2017, the Company has adopted the ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. As a result of adoption, the Company recognized an $813 thousand tax benefit as a reduction of income tax expense, however, due to full valuation allowance, the net impact is zero.

As of December 31, 2017, there were no material changes to what the Company disclosed regarding tax uncertainties or penalties as of December 31, 2016.