Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Taxes [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, 2024 and 2023 are as follows:

 

(in thousands)   2024     2023  
Deferred tax assets:            
Net operating losses carry forward   $ 47,875     $ 41,698  
Deferred revenue     8,217       8,219  
Share-based compensation     1,572       1,512  
Research and development/orphan drug credits     23,296       20,509  
Capitalized research and development expenses     20,664       18,684  
Others     (11 )     (57 )
Less: valuation allowance     (101,613 )     (90,565 )
Deferred tax assets, net   $
-
     $
-
  

 

The Company has recorded a valuation allowance of $101.6 million and $90.6 million against its deferred tax assets at December 31, 2024 and 2023 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 $189.3 million of unused net operating losses (“NOLs”) at December 31, 2024 available for carry forward to future years. NOLs of $104.8 million generated prior to 2018 will begin to expire if unused beginning in 2026 when approximately $3.9 million in NOLs are due to expire. The Company’s largest NOLs will begin to expire in 2034 - 2037, with each year in excess of $15 million. NOLs generated in 2018 and later years of $84.6 million have an indefinite life, but will be limited to 80% of their value if used in a tax year ending after January 1, 2023.

 

For state income tax purposes, the Company has $327.8 million of unused NOLs at December 31, 2024 available for carry forward to future years. These NOLs will begin to expire in 2035 if unused.

 

The Company has federal research and development tax credits of $6.7 million at December 31, 2024, which will begin to expire in 2033 if unused and orphan drug credits of $16.5 million which will begin to expire in 2037 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 Tax Cuts and Jobs Act of 2017 (TCJA) has modified the IRC 174 expenses related to research and development for the tax years beginning after December 31, 2021. Under the TCJA, the Company must now capitalize the expenditures related to research and development activities and amortize them over five years for U.S. activities and 15 years for non-U.S. activities. Since this has been the Company's policy since 2018, the current year capitalization of research and development costs in accordance with IRC 174 was $28.0 million for a total accumulated gross amount of $87.9 million as of December 31, 2024. 

 

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, 2024 and 2023 are as follows:

 

(in thousands)   December 31,
2024		     December 31,
2023		  
                         
Federal statutory income taxes   $ (8,031 )     (21.0 )%   $ (10,252 )     (21.0 )%
State income taxes     (1,275 )     (3.3 )%     (1,743 )     (3.6 )%
Deferred true-up     259       0.7 %     176       0.4 %
Research and development/orphan drug tax credit     (2,787 )     (7.3 )%     (3,263 )     (6.7 )%
Other     788       2.0 %     608       1.2 %
Change in valuation allowance     11,046       28.9 %     14,474       29.7 %
Provision for income tax   $
-  
      
-  
     $
-  
      
-