Income Taxes
The provision (benefit) for income taxes for the years ended December 31, 2016 and 2015 differs from the approximate amount of income tax benefit determined by applying the U.S. federal income tax rate to pre-tax loss, due to the following:
|
| | | | | | | | | | | | | | |
| | For the Year Ended December 31, 2016 | | For the Year Ended December 31, 2015 |
| | Amount
(in thousands) | | % of
Pretax
Loss | | Amount
(in thousands) | | % of
Pretax
Loss |
Income tax benefit at federal statutory rate | | $ | (5,531 | ) | | 35.0 | % | | $ | (7,479 | ) | | 35.0 | % |
State tax provision, net of federal tax benefit | | (777 | ) | | 4.9 | % | | (878 | ) | | 4.1 | % |
Tax credits | | (342 | ) | | 2.2 | % | | (232 | ) | | 1.1 | % |
Stock based compensation | | 206 |
| | (1.3 | )% | | 201 |
| | (0.9 | )% |
Derivative warrants | | (534 | ) | | 3.4 | % | | (12 | ) | | 0.1 | % |
Investor consideration | | — |
| | — | % | | (110 | ) | | 0.5 | % |
Change in valuation allowance | | 7,459 |
| | (47.2 | )% | | 6,617 |
| | (31.0 | )% |
Foreign operations | | 251 |
| | (1.6 | )% | | 283 |
| | (1.3 | )% |
Other | | (732 | ) | | 4.6 | % | | 426 |
| | (2.1 | )% |
Income tax (benefit) provision | | $ | — |
| | — | % | | $ | (1,184 | ) | | 5.5 | % |
During November 2015, we sold $15,990,475 of gross State of New Jersey net operating loss (“NOL”) carryforwards relating to the 2013 and 2014 tax years as well as $289,978 of research and development tax credits, resulting in the receipt of $1,183,564, net of expenses. On February 22, 2017, we sold $18,177,059 of gross State of New Jersey NOL’s relating to the 2014 and 2015 tax years as well as $167,572 of state research and development tax credits, resulting in the receipt of approximately $950,000, net of expenses.
We transferred the NOL carryforwards through the Technology Business Tax Certificate Transfer Program sponsored by the New Jersey Economic Development Authority.
Approximate deferred taxes consist of the following components as of December 31, 2016 and 2015 (in thousands):
|
| | | | | | | | |
| | 2016 | | 2015 |
Deferred tax assets: | | | | |
Net operating loss carryforwards | | $ | 32,273 |
| | $ | 25,085 |
|
Accruals and reserves | | 1,829 |
| | 1,100 |
|
Non-qualified stock options | | 3,882 |
| | 3,357 |
|
Research and development tax credits | | 1,331 |
| | 989 |
|
Derivative warrant liability | | 26 |
| | 26 |
|
Investment in joint venture | | 250 |
| | 251 |
|
Goodwill | | — |
| | 283 |
|
Fixed assets | | — |
| | 78 |
|
Other | | 8 |
| | 6 |
|
Total deferred tax assets | | 39,599 |
| | 31,175 |
|
Less valuation allowance | | (38,634 | ) | | (31,175 | ) |
Net deferred tax assets | | 965 |
| | — |
|
Deferred tax liabilities | | | | |
Fixed assets | | (401 | ) | | — |
|
Goodwill and intangible assets | | (564 | ) | | — |
|
Net deferred taxes | | $ | — |
| | $ | — |
|
Due to a history of losses we have generated since inception, we believe it is more-likely-than-not that all of the deferred tax assets will not be realized as of December 31, 2016 and 2015. Therefore, we have recorded a full valuation allowance on our deferred tax assets. We have net operating loss carryforwards for federal income tax purposes of approximately $87 million as of December 31, 2016. The net operating loss carryforwards will begin to expire in 2027. Utilization of these carryforwards is subject to limitation due to ownership changes that may delay the utilization of a portion of the carryforwards.