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SEC Filings

424B3
BIOTIME INC filed this Form 424B3 on 02/04/2019
Entire Document
 

 

 

10. Income Taxes

 

The primary components of the deferred tax assets and liabilities at December 31, 2017 and 2016 were as follows (in thousands):

 

   December 31, 
   2017   2016 
Deferred tax assets:          
Net operating loss carryforwards  $15,110   $16,844 
Research and development credits   5,643    2,395 
Stock based compensation and other   2,130    2,597 
Valuation allowance   (17,691)   (8,081)
Total deferred tax assets   5,192    13,755 
Deferred tax liabilities:          
Patents and licenses   (3,488)   (7,564)
Securities held as available for sale   (1,704)   (6,191)
Total deferred tax liabilities   (5,192)   (13,755)
Net deferred tax liabilities  $   $ 

 

Income taxes differed from the amounts computed by applying the U.S. federal income tax of 34% to pretax losses from operations as a result of the following:

 

   Years Ended December 31, 
   2017   2016 
Computed tax benefit at federal statutory rate   34%   34%
Permanent differences   3%   (10)%
State tax benefit, net of effect on federal income taxes   5%   (3)%
Change in valuation allowance   (29)%   (16)%
Research and development credits   7%   1%
Tax reform – tax rate change   (20)%    
    %   6%

 

As of December 31, 2017, Asterias has net operating loss carryforwards of approximately $62.3 million and $29.1 million, respectively, for federal and California tax purposes, which expire between 2032 and 2037 for federal and between 2033 and 2037 for California. In addition, as of December 31, 2017, Asterias has federal and California research tax credit carry forwards of $4.1 million and $2.0 million, respectively. The federal tax credits expire between 2033 and 2036, while the state tax credits have no expiration date.

 

No federal and state tax provision or benefit was recorded for year ended December 31, 2017. A deferred income tax benefit of approximately $2.3 million was recorded for the year ended December 31, 2016 related to federal taxes. No state tax provision or benefit was recorded for year ended December 31, 2016. A deferred income tax benefit of approximately $7.3 million was recorded for the year ended December 31, 2015, of which approximately $7.4 million was related to federal taxes and $0.1 million was related to state taxes.

 

Asterias established deferred tax liabilities primarily related to its acquisition of certain intellectual property and available for sale securities held in BioTime and OncoCyte common stock. Asterias has established a valuation allowance for California deferred tax assets as of December 31, 2015. In assessing the realization 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 ultimate realization of deferred tax assets is dependent upon future generation of taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance for federal and California deferred tax assets as of December 31, 2016 and 2017. For the years ended December 31, 2017 and 2016, the change in the valuation allowance was approximately $9.6 million and $5.2 million, respectively.

 

On February 16, 2016, Asterias entered into a Cross-License Agreement and Share Transfer Agreement with BioTime and BioTime’s wholly owned subsidiary ES Cell International Pte. Ltd. (“ESI”). The transfer of assets was a taxable transaction to Asterias generating a taxable gain of approximately $3.1 million. Asterias has sufficient current year losses from operations in 2016 to offset the entire gain resulting in no income taxes due. As the transfer of assets and the resulting taxable gain is due to a direct effect of transactions between Asterias and its then parent company, BioTime, Asterias recorded the tax effect of this gain through equity with a corresponding release of the valuation allowance, in accordance with ASC 740-20-45-11(g), during the year ended December 31, 2016.

 

 F-26 

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