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Note 14 - Income Taxes | 12 Months Ended
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Dec. 31, 2016
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 14 . Income Taxes Prior to the Merger, the Company was treated as a partnership for federal income tax purposes. Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse. A deferred tax liability of $3.6 million was recorded for the basis differences associated with indefinite-lived in-process R&D assets. In August 2016, the Company abandoned future development efforts for the IPR&D asset associated with RES- 440 and recorded an impairment charge of $1.0 million which is equal to its acquired value. Upon recognizing the impairment, the Company recognized an income tax benefit of $0.4 million and reduced the carrying value of the related deferred tax liability as of December 31, 2016 (See Note 4). Significant components of the Company's deferred tax assets for federal income taxes as of December 31, 2016 consisted of the following:
Deferred tax assets |  | December 31, 2016 |
Net operating loss carryforwards |  | $ | 7,547,296 |
Stock option compensation |  |  | 2,720,186 |
Orphan Drug credits |  |  | 1,218,069 |
Capitalized start-up costs and other |  |  | 4,690,843 |
Valuation allowance |  |  | (16,176,394 | )
Net deferred tax asset |  | $ | — |
Deferred tax liabilities |  |  |  |
Intangible assets |  |  | (3,279,363 | )
Net deferred tax liability |  | $ | (3,279,363 | )
The changes in the valuation allowance that occurred during 2016 were as follows:
Valuation allowance at beginning of year |  | $ | — |
Changes recorded to income tax provision |  |  | 5,017,047 |
Changes recorded in purchase accounting |  |  | 11,159,347 |
Valuation allowance at end of year |  | $ | 16,176,394 |
The Company does not have unrecognized tax benefits as of December 31, 2016. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company had net operating loss carryforwards (“NOL”) for federal and state income tax purposes at December 31, 2016 of approximately:
Combined NOL Carryforwards: |  | December 31, 2016 |
Federal |  | $ | 19,842,612 |
State |  | $ | 20,222,492 |
Upon completion of the Merger, the Company acquired the net operating losses for federal and state income tax purposes which RestorGenex has incurred since inception. The Tax Reform Act of 1986 (the “Act”) provides for limitation on the use of net operating loss following certain ownership changes (as defined in the Act) that could limit the Company’s ability to utilize these carryforwards. The Company experienced an ownership change as a result of the Merger. The net operating loss carryforwards begin expiring in 2034 for federal income tax purposes and for state income tax purposes. In January 2016, the number of outstanding shares of RestorGenex common stock increased in connection with the Merger discussed in note 4. This increase in the number of shares outstanding resulted in a change of ownership, under the provisions of Internal Revenue Code Section 382 and similar state provisions, and limits the Company’s ability to utilize these net operating loss carryforwards to offset future income. The amounts above reflect the amount of NOLs that the Company expects to be able to utilize as a result of the limitation. The Company recorded a 100% valuation allowance of the deferred tax assets as of December 31, 2016, because of the uncertainty of their realization. A reconciliation of income tax benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements as of December 31, 2016 is as follows:
Rate reconciliation: |  | December 31, 2016 |
Federal tax benefit at statutory rate |  |  | (34.0 | ) %
State tax, net of Federal benefit |  |  | (2.3 | )
Litigation settlement charge |  |  | 4.6 |
Acquisition costs |  |  | 2.8 |
Orphan drug credit |  |  | (4.4 | )
Change in valuation allowance |  |  | 27.2 |
Stock compensation |  |  | 4.2 |
Other |  |  | (0.1 | )
Total provision |  |  | (2.0 | ) %
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company’s 2013 to 2015 tax years remain open and subject to examination.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
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