Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 8 - Income Taxes

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2021 and 2020 are as follows:

 

(in thousands)   2021     2020  
Deferred tax assets:            
Net operating losses carry forward   $ 36,405     $ 33,955  
Share-based compensation     1,213       1,689  
Research and development/orphan drug credits     14,536       12,638  
Intangibles     10,426       7,873  
Others     19       19  
Less: valuation allowance     (62,599 )     (56,174 )
Deferred tax assets, net   $
-
     $
-
  

 

The Company has recorded a valuation allowance of $62.6 million and $56.2 million against its deferred tax assets at December 31, 2021 and 2020 respectively, because management determined that it is not more-likely-than not that those assets will be realized.

 

For federal income tax purposes, the Company has $163.0 million of unused net operating losses (“NOLs”) at December 31, 2021 available for carry forward to future years. NOLs of $120.8 million generated prior to 2018 will begin to expire if unused in 2022. NOLs generated in 2018 and later years of $42.2 million have an indefinite life, but will be limited to 80% of their value if used in a tax year ending after January 1, 2022.

 

For state income tax purposes, the Company has $87.9 million of unused NOLs at December 31, 2021 available for carry forward to future years. These NOLs will begin to expire in 2034 if unused.

 

The Company has federal research and development tax credits of $2.9 million at December 31, 2021 which will begin to expire in 2034 if unused and orphan drug credits of $11.6 million which will begin to expire in 2028 if unused.

  

Federal and state tax laws impose limitations on the utilization of net operating losses and credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. Accordingly, the Company’s ability to utilize these carryforwards may be limited as a result of an ownership change which may have already happened or may happen in the future. Such an ownership change could result in a limitation in the use of the net operating losses in future years and possibly a reduction of the net operating losses available.

 

The difference between the income tax provision and the amount that would result if the U.S. Federal statutory rates were applied to pre-tax losses for the year ended December 31, 2021 and 2020 are as follows:

 

(in thousands)   December 31,
2021		     December 31,
2020		  
                         
Federal statutory income taxes   $ (5,202 )     (21.0 )%   $ (4,665 )     (21.0 )%
State income taxes     (373 )     (1.5 )%     56       0.3 %
Deferred true-up     562       2.3 %     (64 )     (0.3 )%
Research and development/orphan drug tax credit     (1,898 )     (7.7 )%     (1,766 )     (8.0 )%
Other     486       2.0 %     202       0.9 %
Change in valuation allowance     6,425       25.9 %     6,237       28.1 %
Provision for income tax   $
-
      
-
     $
-
      
-