Abeona Therapeutics Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

INCOME TAXES

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 9 – INCOME TAXES

Income tax expense differs from the statutory amounts as follows:

	2017		2016

Income taxes at U.S. statutory rate	$	(9,289,000)	$	(7,437,000)
Current year reserve		(25,175,000)		7,423,000
Expenses not deductible		46,000		14,000
Rate change		34,418,000		-

Total tax expense	$	-	$	-

Deferred taxes are provided for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. The temporary differences that give rise to deferred tax assets and liabilities were as follows:

	December 31,
	2017		2016
Deferred tax assets (liabilities):
Net operating loss carryforwards	$	50,029,000	$	73,864,000
General business credit carryforwards		3,227,000		2,557,000
State credits		3,089,000		3,089,000
Property, equipment and goodwill		(28,000)		(23,000)
Stock options		5,122,000		6,450,000
Derivatives		(57,000)		(92,000)
Deferred revenue		778,000		1,464,000
Intangible assets		379,000		228,000
Accrued interest		156,000		253,000
Other		143,000		231,000
Gross deferred tax assets		62,838,000		88,021,000
Valuation allowance		(62,838,000)		(88,021,000)
Net deferred taxes	$	-	$	-

At December 31, 2017, we had approximately $238,235,000 of net operating loss carryforwards and approximately $2,654,000 of general business credit carryforwards. These carryforwards expire as follows:

	Net operating loss carryforwards		General business credit carryforwards
2018	$	3,324,000	$	112,000
2019		3,306,000		95,000
2020		5,125,000		226,000
2021		5,378,000		56,000
Thereafter		221,102,000		2,165,000
	$	238,235,000	$	2,654,000

As a result of a merger on January 25, 1996, a change in control occurred for federal income tax purposes, which limits the utilization of pre-merger net operating loss carryforwards of approximately $3,100,000 to approximately $530,000 per year.

Additionally, we acquired MacroChem Corporation on February 25, 2009. The corporation was a loss company at the time of the acquisition. Therefore, the net operating losses related to the acquisition may be subject to annual limitations as provided by Internal Revenue Code Sec. 382.

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act. The Act reduces the US federal corporate tax rate from 34% to 21%. At December 31, 2017 we have not completed our accounting for the tax effects of enactment of the Act. However, in certain cases, as described below, we have made a reasonable estimate of the effects on our existing deferred tax balances.

Deferred tax assets and liabilities: We recalculated the deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, we are still analyzing certain aspects of the Act and refining our calculations, which could potentially affect the recalculation of these balances. The provisional amount recorded related to the recalculation of deferred tax balances is $34,418,000.