Income Taxes
The loss before income taxes and the related tax benefit are as follows (in thousands):
|
| | | | | | | | | | | |
| Year ended March 31, 2017 | | Year ended March 31, 2016 | | Period from October 31, 2014 (Date of Inception) through March 31, 2015 |
Loss before income taxes: | | | | | |
Bermuda | $ | (109,334 | ) | | $ | (119,207 | ) | | $ | (21,047 | ) |
Switzerland | (55,594 | ) | | — |
| | — |
|
United States | (17,083 | ) | | (13,955 | ) | | 1 |
|
Total loss before income taxes | $ | (182,011 | ) | | $ | (133,162 | ) | | $ | (21,046 | ) |
| | | | | |
Current taxes: | | | | | |
United States | 1,326 |
|
| 306 |
| | 1 |
|
Switzerland | — |
|
| — |
| | — |
|
Bermuda | — |
|
| — |
| | — |
|
Total current tax expense | 1,326 |
| | 306 |
| | 1 |
|
Deferred taxes: | | | | | |
United States | (2,386 | ) |
| (323 | ) | | — |
|
Switzerland | — |
|
| — |
| | — |
|
Bermuda | — |
|
| — |
| | — |
|
Total deferred tax benefit | (2,386 | ) | | (323 | ) | | — |
|
Total income tax (benefit) expense | (1,060 | ) | | (17 | ) | | 1 |
|
The Company's provision for income taxes is based primarily on income taxes in the United States for federal, state and local income taxes. The Company's effective tax rate for the years ended March 31, 2017 and March 31, 2016 and for the period October 31, 2014 (date of inception) to March 31, 2015 was 0.58%, 0.01% and 0.00%, respectively, primarily due to the organization of the Company as a Bermuda Exempted Limited Company, for which there is no current tax regime, due to U.S. permanent unfavorable differences, and a valuation allowance that effectively eliminates the Company's net deferred tax assets in the United States. As of March 31, 2017 and March 31, 2016, the Company had an aggregate income tax receivable of $0.7 million and $1.0 million, respectively, from various federal, state, and local jurisdictions.
Deferred taxes reflect the tax effects of the differences between the amounts records as assets and liabilities for financial reporting purposes and the comparable amounts recorded for income tax purposes. Significant components of the deferred tax assets at March 31, 2017 and 2016 are as follows (in thousands):
|
| | | | | | | |
| March 31, 2017 | | March 31, 2016 |
Research tax credits | $ | 1,793 |
| | $ | 283 |
|
Other | 937 |
| | 11 |
|
Swiss net operating loss | 10,623 |
| | — |
|
Depreciation | (21 | ) | | 29 |
|
Share-based compensation | 13,518 |
| | 6,919 |
|
Subtotal | 26,850 |
| | 7,242 |
|
Valuation allowance | (24,141 | ) | | (6,919 | ) |
Total deferred tax assets | $ | 2,709 |
| | $ | 323 |
|
The Company assesses the realizability of the deferred tax assets at each balance sheet date based on available positive and negative evidence in order to determine the amount which is more likely than not to be realized and record a valuation allowance as necessary. As a result of this assessment, valuation allowances of $13.5 million and $6.9 million related to share-based compensation and $10.6 million and $0.0 million related to Swiss net operating loss carryforward have been recorded as of March 31, 2017 and March 31, 2016, respectively. During the year ended March 31, 2017, the valuation allowance increased by $17.2 million. The Swiss net operating loss carryforward expires in year 2024. The Company believes that it is more likely than not, given the weight of available evidence, that all other deferred tax assets will be realized. The Company will continue to assess the realizability of deferred tax assets at each balance sheet date in order to determine the proper amount, if any, required for a valuation allowance.
A reconciliation of income tax benefit computed at the Bermuda statutory rate to income tax benefit reflected in the financial statements is as follows:
|
| | | | | | | | | | | | | | | | | | |
| | Year Ended | | Year Ended | | Period from October 31, 2014 |
| | March 31, 2017 | | March 31, 2016 | | to March 31, 2015 |
| | $ (000s) | % | | $ (000s) | % | | $ (000s) | % |
| | | | | | | | | |
Income tax benefit at Bermuda statutory rate | | $ | — |
| — | % | | $ | — |
| — | % | | $ | — |
| — | % |
Foreign rate differential | | (18,140 | ) | 9.96 |
| | (4,745 | ) | 3.56 |
| | — |
| — |
|
Valuation allowance | | 18,607 |
| (10.22 | ) | | 5,194 |
| (3.90 | ) | | — |
| — |
|
Other | | (1,527 | ) | 0.84 |
| | (466 | ) | 0.35 |
| | 1 |
| — |
|
| | | | | | | | | |
Total income tax (benefit) expense | | $ | (1,060 | ) | 0.58 | % | | $ | (17 | ) | 0.01 | % | | $ | 1 |
| — | % |
The Company files income tax returns in the United States federal, state and local jurisdictions. ASI filed its initial U.S. federal, state and local income tax returns for the fiscal year ended March 31, 2015 in December 2015. The Company is subject to tax examinations for fiscal year 2016 and forward in all applicable tax jurisdictions.