Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.1
Income Taxes
12 Months Ended
Dec. 31, 2019
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, 2019 and 2018 are as follows:

 

    2019     2018  
Deferred tax assets:            
Net operating losses carry forward   $ 31,688,387     $ 34,531,577  
Share-based compensation     1,421,701       2,950,963  
Research and development/orphan drug credits     10,871,634       8,896,703  
Intangibles     5,942,126       -  
Others     13,172       15,285  
Less: valuation allowance     (49,937,020 )     (46,394,528 )
                 
Deferred tax assets, net   $ -     $ -  

 

The Company has recorded a valuation allowance of $49.9 million and $46.4 million against its deferred tax assets at December 31, 2019 and 2018, 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 $140.6 million of unused net operating losses ("NOLs") at December 31, 2019 available for carry forward to future years. Prior NOLs have begun to expire as they are unused.

 

For state income tax purposes, the Company has $71.5 million of unused NOLs at December 31, 2019 available for carry forward to future years. These NOLs will begin to expire in 2033 if unused.

 

The Company has federal research and development tax credits of $1.8 million at December 31, 2019 which will begin to expire in 2033 if unused and orphan drug credits of $9.1 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 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, 2019 and 2018 are as follows:

 

    December 31,
2019
    December 31,
2018
 
                         
Federal statutory income taxes   $ (4,598,801 )     (21.0 )%   $ (4,967,332 )     (21.0 )%
State income taxes     1,076,602       4.9 %     1,413,678       6.0 %
Deferred true-up     1,809,913       8.3 %     -       - %
Research and Development/Orphan Drug Tax Credit     (1,974,931 )     (9.0 )%     (1,986,609 )     (8.4 )%
Other     144,725       0.6 %     40,049       0.2 %
Change in valuation allowance     3,542,492       16.2 %     5,500,214       23.2 %
                                 
Provision for income tax   $ -       -     $ -       -