Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Taxes  
Income Taxes

Note 7 - Income Taxes

The Company has accumulated net losses since inception and has not recorded an income tax provision or benefit during the years ended December 31, 2020 and 2019.

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, 

 

    

2020

    

2019

 

Percentage of pre-tax income:

 

  

 

  

Statutory federal income tax rate

 

21

%  

21

%

State taxes, net of federal tax benefit

 

5

%  

6

%

Change in state tax rate

 

(1)

%  

2

%

Provision to return

 

1

%  

%

Stock based compensation shortfall

 

(1)

%  

(1)

%

Other

 

(1)

%  

(1)

%

Change in valuation allowance

 

(24)

%  

(27)

%

Income taxes provision (benefit)

 

%  

%

The components of the net deferred tax asset as of December 31, 2020 and 2019 are the following (in thousands):

As of December 31, 

    

2020

    

2019

Deferred tax assets:

 

  

 

  

Net operating loss carryovers

$

27,537

$

23,051

Stock compensation and other

 

2,191

 

2,057

Amortization of license

 

5,560

 

4,878

Accruals and reserves

 

178

 

184

Tax credits

 

1,781

 

1,532

Start Up Costs

 

28

 

31

Total deferred tax assets

 

37,275

 

31,733

Less valuation allowance

 

(37,275)

 

(31,733)

Deferred tax asset, net of valuation allowance

$

$

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 $37.3 million and $31.7 million was recorded for the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, the Company had federal and state net operating loss carryforwards of approximately $101.1 million and $94.9 million, respectively. Approximately $69.9 million of the federal net operating loss carryforwards can be carried forward indefinitely. The remaining $31.2 million of federal and all state net operating loss carryforwards will begin to expire, if not utilized, by 2035 and 2035, respectively. The Company has $1.1 million of research and development credit carryforwards and $0.7 million of orphan drug credit carryforwards, which will begin to expire, if not utilized, by 2035. Utilization of the net operating loss and credit carryforwards 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 matters 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 year ended December 31, 2020 and 2019. 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, 2020 and 2019. The Company would classify interest and penalties related to uncertain tax positions as income tax expense, if applicable.

The federal and state tax returns for the periods ended December 31, 2017, 2018 and 2019 are currently open for examination under the applicable federal and state income tax statues of limitations. The Company is currently under examination by the New York City Department Finance for the 2016, 2017 and 2018 tax years. While the outcomes of the examinations are unknown, the Company does not expect any material adjustments.