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, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 12 — INCOME TAXES

Income tax expense differs from the statutory amounts for each of the following years:

	2018			2017			2016
Income taxes at U.S. statutory rate	$	(11,901,000	)	$	(9,289,000	)	$	(7,437,000	)
Current year reserve		11,877,000			(25,175,000	)		7,423,000
Expenses not deductible		24,000			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, 2018			December 31, 2017
Deferred tax assets (liabilities):
Net operating loss carryforwards	$	38,761,000		$	50,029,000
General business credit carryforwards		3,214,000			3,227,000
State credits		3,012,000			3,089,000
Property, equipment and goodwill		(72,000	)		(28,000	)
Stock options		6,316,000			5,122,000
Derivatives		(57,000	)		(57,000	)
Deferred revenue		62,000			778,000
Intangible assets		399,000			379,000
Accrued interest		0			156,000
Other		80,000			143,000
Gross deferred tax assets		51,715,000			62,838,000
Valuation allowance		(51,715,000	)		(62,838,000	)
Net deferred taxes	$	—		$	—

At December 31, 2018, we had approximately $184.6 million of net operating loss carryforwards and approximately $3.2 million of general business credit carryforwards.

These carryforwards expire as follows:

	Net operating loss carryforwards		General business credit carryforwards
2019	$	3,306,000	$	95,000
2020		5,125,000		226,000
2021		5,378,000		56,000
2022		8,230,000		431,000
Thereafter		162,537,000		2,406,000
	$	184,576,000	$	3,214,000

We acquired MacroChem Corporation on February 25, 2009 and Somanta Pharmaceuticals, Inc. on January 4, 2008. Both of these corporations were loss-making entities at the time of acquisition. As a result, the net operating losses related to those acquisitions may be subject to annual limitations as well.

On December 22, 2017, President Donald Trump signed the Tax Cuts and Jobs Act (the “Act”). The Act reduces the U.S. federal corporate tax rate from 34% to 21%. At December 31, 2017, we recalculated our deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%, and recorded a provisional adjustment of $34,418,000. In 2018, the accounting for the income tax enactment-date effects of the Act were completed and there was no adjustment to the provisional amount recorded in 2017.