Income Taxes (FASB ASC 740 Income Taxes)

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes (FASB ASC 740 Income Taxes)

(13) Income Taxes (FASB ASC 740 Income Taxes)

The Company applies the provisions of FASB ASC 740-10 Uncertainty in Income Taxes. As a result of the implementation, there has been no material change to the Company’s tax position as they have not paid any corporate income taxes due to operating losses. All tax benefits will likely not be recognized due to the substantial net operating loss carryforwards which will most likely not be realized prior to expiration. The 2017 Tax Act, which was signed into law on December 22, 2017, has resulted in significant changes to the U.S. corporate income tax system. These changes include a federal statutory rate reduction from 35% to 21%, the elimination or reduction of certain domestic deductions and credits and limitations on the deductibility of interest expense and executive compensation. The 2017 Tax Act also transitions international taxation from a worldwide system to a modified territorial system and includes base erosion prevention measures on non-U.S. earnings, which has the effect of subjecting certain earnings of our foreign subsidiaries to U.S. taxation as global intangible low taxed income (GILTI). These changes are effective beginning in 2018.

As of December 31, 2018, the Company has approximately $183,000,000 of Federal net operating loss carryforwards (expiring in the years 2019 through 2037) and $7,000,000 of Federal net operating loss with no expiration date available to offset future federal taxable income. The Company also has approximately $34,000,000 of Pennsylvania state net operating loss carryforwards (expiring in the years 2019 through 2033) and approximately $10,000,000 of New Jersey state net operating loss carryforwards (expiring in 2038) available to offset future state taxable income. In December 2018 the Company effectively sold $10,000,000 of its New Jersey state net operating loss carryforward for the year 2017 for approximately $859,000. In December 2017, the Company effectively sold $8,000,000 of its New Jersey state net operating loss carryforward for the year 2016 for approximately $622,000, and also sold New Jersey research and development credits for $169,000.

The utilization of certain state net operating loss carryforwards may be subject to annual limitations. With no tax due for the foreseeable future, the Company has determined that a policy to determine the accounting for interest or penalties related to the payment of tax is not necessary at this time.

Under the Tax Reform Act of 1986, the utilization of a corporation’s net operating loss carryforward is limited following a greater than 50% change in ownership. Due to the Company’s prior and current equity transactions, the Company’s net operating loss carryforwards may be subject to an annual limitation generally determined by multiplying the value of the Company on the date of the ownership change by the federal long-term tax exempt rate. Any unused annual limitation may be carried forward to future years for the balance of the net operating loss carryforward period. The 2017 Tax Act eliminates the three year carryback of net operating losses and allows only the carryforward of losses.

Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Due to the uncertainty of the Company’s ability to realize the benefit of the deferred tax asset, the deferred tax assets are fully offset by a valuation allowance at December 31, 2018 and 2017.

The components of the net deferred tax assets and liabilities as of December 31, 2018 and 2017 consist of the following:

	(in thousands)
	December 31,
	2018			2017
Deferred tax assets:
Net operating losses	$	39,866		$	38,005
Amortization & depreciation		131			138
Accrued expenses		100			51
Stock compensation		191			120
Total deferred tax assets		40,288			38,314
Deferred tax liabilities:
Research and development costs		(127	)		(189	)
Deferred tax assets, net		40,161			38,125
Less: Valuation allowance		(40,161	)		(38,125	)
Deferred tax assets, net		—			—