Entity information:

• Entity registrant name: ROCKET PHARMACEUTICALS, INC.
• CIK: 0001281895
• SEC filing page: http://www.sec.gov/Archives/edgar/data/1281895/000156459018004621/0001564590-18-004621-index.htm
• XBRL Instance: http://www.sec.gov/Archives/edgar/data/1281895/000156459018004621/rckt-20171231.xml
• XBRL Cloud Viewer: https://edgardashboard.xbrlcloud.com/flex/viewer/XBRLViewer.html#instance=http://www.sec.gov/Archives/edgar/data/1281895/000156459018004621/rckt-20171231.xml
• EDGAR Dashboard: https://edgardashboard.xbrlcloud.com/edgar-dashboard/?cik=0001281895
• Generator: Donnelley Financial Solutions
• Total assets: 101,778,000
• Income tax expense (benefit):
• Found reconcilation from statutory to effective rates: True
• Found income tax policy: Coming soon!

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6. Income Taxes

No provision for federal or state income taxes was recorded during the years ended December 31, 2017 and 2016, as Inotek incurred operating losses for each of these years.

Net loss by jurisdiction consists of the following:

 

A reconciliation between the effective tax rates and statutory rates for the years ended December 31, 2017 and 2016 is as follows:

 

 

The tax effect of significant temporary differences representing deferred tax assets and liabilities as of December 31, 2017 and 2016 is as follows:

 

 

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was enacted and significantly revised the U.S. income tax law. The TCJA includes changes which reduce the corporate income tax rate from 35% to 21% for years beginning after December 31, 2017, and establish a territorial-style system for taxing foreign-source income of domestic multinational companies.

GAAP requires re-measurement of US deferred tax assets and liabilities to reflect the impact of a tax rate reduction in the period that includes enactment date. As a result, Inotek has revalued its deferred taxes assets and liabilities to 21% in the December 31, 2017 financial statements and the impact was offset by Inotek’s valuation allowance. Inotek has reflected the associated impact in the reconciliation of its effective tax rate above.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued and allows a company to recognize provisional amounts when it does not have the necessary information available, prepared or analyzed, including computations, in reasonable detail to complete its accounting for the change in tax law. SAB 118 provides for a measurement of up to one year from the date of enactment. Inotek has not yet fully completed its analysis of the TCJA, however based on the total unrepatriated accumulated foreign earnings, Inotek does not believe any additional income taxes are due as any income, if determined, will be fully offset by Inotek’s NOL carryforwards.

As required by ASC 740, Income Taxes, management of Inotek has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of NOL carryforwards and capitalized research and development costs. As a result of the fact that Inotek has incurred tax losses from inception, management has determined that it is more likely than not that Inotek will not recognize the benefits of federal and state net deferred tax assets and, as a result, a full valuation allowance has been established against its net deferred tax assets as of December 31, 2017 and 2016. Inotek has offset certain deferred tax liabilities with deferred tax assets that are expected to generate offsetting deductions within the same period. During the years ended December 31, 2017 and 2016, the valuation allowance decreased by $13,414 and increased by $17,312, respectively. Realization of deferred tax assets is dependent upon the generation of future taxable income.

As of December 31, 2017, Inotek had federal NOL carryforwards for income tax purposes of $127,132 that expire at various dates through 2037, and state NOL carryforwards of $83,428 that expire at various dates through 2037, available to reduce future federal and state income taxes, if any. As of December 31, 2017, Inotek had federal research and development tax credits of $5,171, and state research and development tax credits of $819. If substantial changes in Inotek’s ownership should occur, as defined in Section 382 of the Internal Revenue Code of 1986, as amended, (the “Code”), there could be annual limitations on the amount of loss carryforwards which can be realized in future periods. Inotek has determined that it has experienced prior ownership changes occurring in 2005, 2007 and 2015. The pre-change NOL carryforwards, although subject to an annual limitation, as well as any post-change NOL carryforwards, can be utilized in future years, provided that sufficient income is generated and no future ownership changes occur that may limit Inotek’s NOL carryforwards.

As of December 31, 2017 and 2016, Inotek’s total unrecognized tax benefits totaled $535 and $488, respectively, which if recognized would affect the effective tax rate prior to the adjustment for Inotek’s valuation allowance. Inotek files income tax returns in the U.S. federal and Massachusetts tax jurisdictions. Starting in tax year 2016, Inotek filed tax returns in the New Jersey tax jurisdiction. Tax years 2014 through 2017 remain open to examination by the tax jurisdictions in which Inotek is subject to tax. Since Inotek is in a loss carryforward position, the Internal Revenue Service (“IRS”) and state taxing authorities are permitted to audit the earlier tax years and propose adjustments up to the amount of the NOL carryforwards generated. Inotek is not currently under examination by the IRS or any other jurisdiction for any tax years.

The change in unrecognized tax benefits for each of the years ended December 31, 2017 and 2016 is as follows:

 

 

The Reverse Merger is expected to result in a substantial reduction to Inotek’s NOL carryforwards and unrecognized tax benefits.