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Note 8 - Income Taxes | 12 Months Ended
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Dec. 31, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 8 — Income Taxes The Company has incurred net losses since inception and, consequently, has not recorded any U.S. Federal and state income tax expense or benefit. The differences between the Company’s effective tax rate and the statutory tax rate in 2019, 2018, and 2017 are as follows:
|  | 2019 |  | 2018 |  | 2017
Income tax benefit at federal statutory rate (21% for 2019, 2018 and 2017) |  | $ | (22,868 | ) |  | $ | (21,263 | ) |  | $ | (23,024 | )
State and local income taxes net of federal tax benefit |  |  | (1,591 | ) |  |  | (2,547 | ) |  |  | (1,611 | )
Permanent items |  |  | 691 |  |  |  | 503 |  |  |  | 910 |
Rate change |  |  | 625 |  |  |  | (29 | ) |  |  | 71,155 |
Expiration of attribute carryforwards |  |  | 3,976 |  |  |  | 2,183 |  |  |  | 918 |
Effect of ASU 2016-09 |  |  | - |  |  |  | - |  |  |  | (5,949 | )
Research and development tax credits |  |  | (4,938 | ) |  |  | (4,905 | ) |  |  | (1,977 | )
Orphan drug credit |  |  | - |  |  |  | - |  |  |  | 564 |
Other |  |  | 281 |  |  |  | 18 |  |  |  | 1,639 |
Change in valuation allowance |  |  | 23,824 |  |  |  | 26,040 |  |  |  | (42,625 | )
Income tax expense |  | $ | - |  |  | $ | - |  |  | $ | - |
In December 2017, the Tax Cuts and Jobs Act (“TCJA”), was signed into law. Among other things, the TCJA permanently lowers the corporate federal income tax rate to 21% from the existing maximum rate of 35%, effective for tax years including or commencing January 1, 2018. As a result of the reduction of the corporate federal income tax rate to 21%, U.S. GAAP requires companies to revalue their deferred tax assets and deferred tax liabilities as of the date of enactment, with the resulting tax effects accounted for in the reporting period of enactment. This revaluation resulted in a provision of $73,474 to income tax expense in continuing operations and a corresponding reduction in the valuation allowance. As a result, there was no impact on the Company’s Consolidated Statements of Operations from the reduction in tax rate. The Company adopted ASU 2016 - 09 during the quarter ended March 31, 2017. As a result of the adoption, the net federal and state operating losses deferred tax assets increased by $5,949 and were offset by a corresponding increase in the valuation allowance. The adoption of ASU 2016 - 09 had no impact on the Company’s Consolidated Balance Sheets or Consolidated Statements of Operations. The Company recognizes the impact of a tax position in its financial statements if it is more likely than not that the position will be sustained on audit based on the technical merits of the position. The Company has concluded that it has an uncertain tax position pertaining to its research and development and orphan drug credit carryforwards. The Company has established these credits based on information and calculations it believes are appropriate and the best estimate of the underlying credit. Any changes to the Company’s unrecognized tax benefits are offset by an adjustment to the valuation allowance and there would be no impact on the Company’s financial statements. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | 2019 |  | 2018
Balance at January 1, |  | $ | 5,976 |  |  | $ | 4,750 |
Additions to current period tax positions |  |  | 1,234 |  |  |  | 1,226 |
Additions to prior period tax positions |  |  | - |  |  |  | - |
Reductions to prior period tax provisions |  |  | - |  |  |  | - |
Balance at December 31, |  | $ | 7,210 |  |  | $ | 5,976 |
The Company’s ability to utilize the net operating loss and tax credit carryforwards in the future may be subject to substantial restrictions in the event of past or future ownership changes as defined in Section 382 of the Internal Revenue Code of 1986, as amended and similar state tax law. Significant components of the Company’s deferred tax assets and liabilities are as follows:
|  | 2019 |  | 2018
Deferred tax assets: |  |  |  |  |  |  |  |
Net federal and state operating losses |  | $ | 155,190 |  |  | $ | 137,234 |
Research and development credits |  |  | 63,275 |  |  |  | 59,509 |
Stock-based compensation |  |  | 9,786 |  |  |  | 7,108 |
Leasing obligations |  |  | 1,070 |  |  |  | - |
Other |  |  | 3,801 |  |  |  | 5,258 |
Total deferred tax assets |  |  | 233,122 |  |  |  | 209,109 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Fixed assets |  |  | (114 | ) |  |  | (418 | )
Right of use asset |  |  | (803 | ) |  |  | - |
Foreign currency derivative |  |  | - |  |  |  | (231 | )
Total deferred tax liabilities |  |  | (917 | ) |  |  | (649 | )
Valuation allowance |  |  | (232,205 | ) |  |  | (208,460 | )
Net deferred tax assets |  | $ | - |  |  | $ | - |
The majority of the Company’s deferred tax assets relate to net operating loss and research and development carryforwards that can only be realized if the Company is profitable in future periods. It is uncertain whether the Company will realize any tax benefit related to these carryforwards. Accordingly, the Company has provided a full valuation allowance against the net deferred tax assets due to uncertainties as to their ultimate realization. The valuation allowance will remain at the full amount of the deferred tax assets until it is more likely than not that the related tax benefits will be realized. The Company’s valuation allowance increased by $23,824 in 2019, increased by $26,040 in 2018, and decreased by $42,625 in 2017 primarily because of the remeasurement required by TCJA. As of December 31, 2019, the Company had federal operating loss carryforwards of $653,524, state operating loss carryforwards of $509,639, and research and development and orphan drug credit carryforwards of $70,485, which will expire at various dates from 2020 through 2037. Federal losses, state losses, research and development credit carryforwards begin to expire in 2020. Tax years 2016 - 2019 remain open to examination by the major taxing jurisdictions to which the Company is subject. Additionally, years prior to 2016 are also open to examination to the extent of loss and credit carryforwards from those years. The Company recognizes interest and penalties accrued related to unrecognized tax benefits as components of its income tax provision. However, there were no provisions or accruals for interest and penalties in 2019, 2018 and 2017.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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