XML 32 R21.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
Income Taxes |
(13) | Income Taxes
There is no income tax provision for the years ended December 31, 2017, 2016 and 2015. Income (loss) before income taxes consists of:
|  | Year Ended December 31, |
(in thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
Domestic |  | $ | (41,313 | ) |  | $ | (13,930 | ) |  | $ | (11,276 | )
Foreign |  |  | (3,804 | ) |  |  | (4,040 | ) |  |  | (3,428 | )
Income (loss) before taxes |  | $ | (45,117 | ) |  | $ | (17,970 | ) |  | $ | (14,704 | )
The provision for income taxes differs from the amount computed by applying the statutory rate as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
Income taxes using U.S federal statutory rate |  | $ | (15,340 | ) |  | $ | (6,110 | ) |  | $ | (4,999 | )
Tax Cuts and Jobs Act |  |  | 143 |  |  |  | — |  |  |  | — |
Nondeductible interest |  |  | 6,912 |  |  |  | — |  |  |  | — |
Loss on extinguishment of debt |  |  | 10,174 |  |  |  |  |  |  |  |  |
Loss of tax benefit of federal net operating loss carryforwards |  |  | 5,067 |  |  |  | 68,795 |  |  |  | — |
Loss of tax benefit of state net operating loss carryforwards |  |  | 1,373 |  |  |  | 13,891 |  |  |  | — |
Loss of tax benefit of federal tax credit carryforwards |  |  | 324 |  |  |  | 4,023 |  |  |  | — |
Amortization of gain on IP migration |  |  | 767 |  |  |  | 767 |  |  |  | 767 |
State income taxes, net of federal benefit |  |  | (1,339 | ) |  |  | (2,576 | ) |  |  | 380 |
Foreign rate differential |  |  | 1,196 |  |  |  | 1,141 |  |  |  | 920 |
Valuation allowance |  |  | (1,423 | ) |  |  | (75,407 | ) |  |  | 2,649 |
Derivative charge |  |  | (8,403 | ) |  |  | (4,345 | ) |  |  | (192 | )
Stock option exercises and cancellations |  |  | 841 |  |  |  | 53 |  |  |  | 674 |
Research and development costs |  |  | (295 | ) |  |  | (250 | ) |  |  | (199 | )
Other |  |  | 3 |  |  |  | 18 |  |  |  | — |
|  | $ | — |  |  | $ | — |  |  | $ | — |
Significant components of the Company’s deferred tax assets are as follows:
|  | Year Ended December 31, |
(in thousands) |  | 2017 |  |  | 2016 |  |  | 2015 |
Deferred tax assets: |  |  |  |  |  |  |  |  |  |  |  |
Employee compensation accruals |  | $ | 292 |  |  | $ | 1,386 |  |  | $ | 1,279 |
Accrued liabilities |  |  | 353 |  |  |  | 343 |  |  |  | 633 |
Research tax credits |  |  | 17 |  |  |  | 22 |  |  |  | 3,796 |
Other |  |  | 34 |  |  |  | 55 |  |  |  | 66 |
Net operating losses |  |  | 5,289 |  |  |  | 6,194 |  |  |  | 77,906 |
Total deferred tax assets |  |  | 5,985 |  |  |  | 8,000 |  |  |  | 83,680 |
Deferred tax liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Beneficial conversion feature |  |  | — |  |  |  | 906 |  |  |  | — |
Other |  |  | 13 |  |  |  | — |  |  |  | — |
Total deferred tax liabilities |  |  | 13 |  |  |  | 906 |  |  |  | — |
Valuation allowance |  |  | 5,972 |  |  |  | 7,094 |  |  |  | 83,680 |
Net deferred tax assets |  | $ | — |  |  | $ | — |  |  | $ | — |
As of December 31, 2017, 2016 and 2015, the Company had net operating loss carryforwards for U.S. federal income tax purposes of approximately $211.3 million, $209.3 million and $184.5 million, respectively. A significant portion of the federal amount, $210.5 million, is subject to an annual limitation of approximately $27,500 as a result of a changes in the Company’s ownership in May 2003, November 2016 and multiple dates throughout 2017, as defined by Federal Internal Revenue Code Section 382 and the related income tax regulations. As a result of the limitations caused by the May 2003, November 2016 and multiple 2017 ownership changes, approximately $209.5 million of the total net operating loss carryforwards is expected to expire unutilized and will be unavailable to offset future federal taxable income. Approximately $1.0 million of net operating loss carryforwards remains available to offset future federal taxable income which will expire between 2018 and 2037. In addition, the Company’s state net operating losses are also subject to annual limitations that generally follow the federal Section 382 provisions (with the exception of Connecticut), adjusted for each state’s respective income apportionment percentages. As of December 31, 2017 and 2016, the Company had net operating loss carryforwards for state and city income tax purposes between approximately $27.3 million and $150.3 million and between approximately $27.3 million and $153.0, respectively, which expire through 2037. As a result of the 382 limitations, approximately $149.0 million and $133.3 million of New York State and New York City net operating losses are expected to expire unutilized and will be unavailable to offset future taxable income. Approximately $0.8 million and $0.8 million of net operating loss carryforwards, respectively, will be available to offset future state and city taxable income. As of December 31, 2017, 2016 and 2015, the Company had a net operating loss carryforward for foreign income tax purposes of $25.0 million, $21.1 million and $22.1 million, respectively, which have indefinite carryforward periods. As of December 31, 2017, 2016 and 2015, the Company had federal research and development tax credit carryforwards of approximately $4.3 million, $4.0 million and $3.8 million, respectively, which expire through 2037. As a result of the section 382 limitation, the entire tax credit carryforward is expected to expire unutilized. Management has established a 100% valuation allowance against the deferred tax assets as management does not believe it is more likely than not that these assets will be realized. The Company’s valuation allowance decreased by approximately $1.1 million and $76.6 million in 2017 and 2016, respectively. The primary reason for the significant decrease in the valuation allowance during 2016 is due to the reduction of recognizable deferred tax assets related net operating loss and credit carryforwards resulting from the Sec. 382 ownership change. The change in valuation allowance is as follows:
(in thousands) |  | December 31, 2017 |  |  | December 31, 2016 |
Beginning balance |  | $ | 7,094 |  |  | $ | 83,680 |
Charged to costs and expenses |  |  | (1,423 | ) |  |  | (75,407 | )
Charged to additional paid-in capital |  |  | — |  |  |  | (1,854 | )
Charged to retained earnings |  |  | — |  |  |  | 1,010 |
Charged to other comprehensive income |  |  | 301 |  |  |  | (335 | )
Ending balance |  | $ | 5,972 |  |  | $ | 7,094 |
On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act (the “Act”). The Act, which is also commonly referred to as “U.S. tax reform”, significantly changes U.S. corporate income tax laws by, among other provisions, reducing the maximum U.S. corporate income tax rate from 35% to 21% starting in 2018. At December 31, 2017, the Company has not completed its accounting for the tax effects of enactment of the Act; however, as described below, the Company has made a reasonable estimate of the effects on its existing deferred tax balances and the one-time transition tax. The Company is continuing to assess the impact from the Act and will record adjustments in 2018 if necessary. During the year ended December 31, 2017, the Company reduced deferred tax assets by a provisional amount of $143,500, offset by a corresponding reduction to its valuation allowance, as a result of the re-measurement of deferred tax assets and liabilities from its 34% effective rate under existing law to the new lower statutory rate of 21%. However, the Company is still analyzing certain aspects of the Act and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The Act also requires a mandatory one-time inclusion of the deferred foreign income of controlled foreign corporations. The one-time transition tax is based on Delcath’s total post-1986 earnings and profits (E&P) for which the Company has previously deferred from U.S. income taxes. The Company’s reasonable estimate resulted in no provisional amount for the one-time transition tax liability, as the Company’s international subsidiaries are expected to have a cumulative deficit in E&P. Delcath has not yet completed its calculation of the total post-1986 foreign E&P (including deficits) for these foreign subsidiaries. As the Company’s international subsidiaries have a cumulative deficit in earnings and profits, the Company does not anticipate being affected by the mandatory inclusion provisions of the Act. On December, 22, 2017, SAB 118 was issued due to the complexities involved in accounting for the recently enacted Act. SAB 118 requires the Company to include in its financial statements a reasonable estimate of the impact of the Act on earnings to the extent such estimate has been determined. Accordingly, the U.S. provision for income tax for 2017 is based on the reasonable estimate guidance provided by SAB 118. The Company is continuing to assess the impact from the Act and will record adjustments in 2018 if necessary. The Company complies with the provisions of ASC 740-10 in accounting for its uncertain tax positions. ASC 740-10 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company has determined that the Company has no significant uncertain tax positions requiring recognition under ASC 740-10 and therefore has not included a tabular rollfoward of unrecognized tax benefits. As there are no uncertain tax positions recognized, interest and penalties have not been accrued. The Company is subject to income tax in the U.S., as well as various state and international jurisdictions. During the third quarter of 2015, the Internal Revenue Service commenced an examination of the Company’s federal income tax return for the year ended December 31, 2013. The examination was completed in the third quarter of 2017 and no changes were made to the reported amounts. Accordingly, there was no effect on the financial statements as a result of the examination. The Company has not been audited by any state tax authorities in connection with income taxes. The Company has not been audited by international tax authorities or any states in connection with income taxes. The Company’s New York State tax returns have been subject to annual desk reviews which have resulted in insignificant adjustments to the related franchise tax liabilities and credits. The Company is no longer subject to federal and state examination for tax years ending prior to December 31, 2014; tax years ending December 31, 2014 through December 31, 2017 remain open to examination. The Republic of Ireland is the Company’s only significant foreign jurisdiction. The Company is no longer subject to Ireland tax examination for tax years ending prior to December 31, 2013 (as Ireland has not initiated an audit of 2012 as of December 31, 2017); tax years ending December 31, 2013 through December 31, 2017 remain open to examination. However, the Company’s tax years December 31, 1998 through December 31, 2017 generally remain open to adjustment for all federal, state and foreign tax matters until its net operating loss and tax credit carryforwards are utilized or expire prior to utilization, and the applicable statutes of limitation have expired in the utilization year. The federal and state tax authorities can generally reduce a net operating loss (but not create taxable income) for a period outside the statute of limitations in order to determine the correct amount of net operating loss which may be allowed as a deduction against income for a period within the statute of limitations. Delcath recognizes interest accrued related to unrecognized tax benefits and penalties, if incurred, as a component of income tax expense.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration