Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Dec. 31, 2020
Income Taxes  
Income Taxes

14. Income Taxes

The income tax provision for the years ended December 31, 2020 and 2019 are as follows (in thousands):

December 31, 

    

2020

    

2019

Current:

Foreign

$

300

$

Federal

State

 

 

Total

 

300

 

Deferred

 

  

 

  

Foreign

Federal

State

 

 

Total

 

 

Total income tax provision (benefit)

$

300

$

Deferred tax assets and liabilities reflect the net effects of net operating losses, or NOLs, and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Realization of the deferred tax assets is contingent on future taxable income and based upon the level of historical losses, management has concluded that the deferred tax assets do not meet the more-likely-than-not threshold for realizability. Accordingly, a full valuation allowance continues to be recorded against the Company's deferred tax assets as of December 31, 2020 and 2019. The Company’s valuation allowance increased by $5.9 million and $9.0 million for the years ended December 31, 2020 and 2019, respectively.

Significant components of the Company’s net deferred tax assets as of December 31, 2020 and 2019 are as follows (in thousands):

December 31, 

    

2020

    

2019

Deferred tax assets:

NOLs

$

25,949

$

22,033

Research and development credits

 

14,920

 

14,138

Research and development expenses capitalized for tax purposes

 

93,812

 

92,350

Equity-based compensation

4,130

4,586

Deferred rent

 

772

 

847

Depreciation

 

246

 

162

Other temporary differences

 

730

 

538

Total deferred tax assets

 

140,559

 

134,654

Deferred tax liabilities:

 

  

 

  

Prepaid expenses

 

(119)

 

(86)

Total deferred tax liabilities

 

(119)

 

(86)

Net deferred tax assets

 

140,440

 

134,568

Less valuation allowance

 

(140,440)

 

(134,568)

Net deferred tax asset

$

$

A reconciliation of income tax expense computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows:

December 31, 

    

2020

    

2019

    

Percent of pre-tax income:

 

  

 

  

 

U.S. federal statutory income tax rate

 

21.0

%  

21.0

%  

Permanent Differences

 

1.0

%  

%  

State taxes, net of federal benefit

 

4.8

%  

8.3

%  

Research and development credit

 

2.6

%  

3.4

%  

Withholding Tax

(1.0)

%  

%  

Stock compensation

(6.9)

%  

%  

Other

 

(2.3)

%  

3.3

%  

Change in valuation allowance

 

(20.2)

%  

(36.0)

%  

Effective income tax rate

 

(1.0)

%  

%  

As of December 31, 2020, the Company had U.S. federal and state NOLs of $90.2 million and $88.8 million, respectively, that begin to expire starting in 2027. As of December 31, 2020, the Company had federal research and development tax credit carryforwards of $14.9 million that begin to expire in 2027. Net operating loss and tax credit carryforwards may become subject to annual limitations in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%, as defined by Sections 382 and 383 of the Internal Revenue Code as well as similar state provisions. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities.

The Company files income tax returns in the U.S. and the Commonwealth of Pennsylvania. Tax years for 2017 and thereafter are open and potentially subject to examination by the federal and state taxing authorities. The Company is currently not under examination by the Internal Revenue Service or any other jurisdictions for any tax years. To the extent the Company utilizes any tax attributes from a tax period that may otherwise be closed due to statute expiration, the Internal Revenue Service, state tax authorities, or other governing parties may still adjust the tax attributes upon their examination of the future period in which the attribute was utilized. There are no uncertain tax positions recorded for any federal or state positions. The Company’s policy is to record interest and penalties related to tax matters in income tax expense.