XML 28 R16.htm IDEA: XBRL DOCUMENT
v3.8.0.1

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2017
Income Tax Disclosure [Abstract] |
INCOME TAXES | 10. INCOME TAXES ﻿ Impact of the Tax Cuts and Jobs Act ﻿ In 2016, Precipio Diagnostics was organized as a limited liability company and operated under the default classification as a partnership until July 31, 2016. Effective August 1, 2016, Precipio Diagnostics elected to be treated as a corporation for tax purposes and as such, a net deferred tax asset, prior to a valuation allowance was created. The Company calculated an income tax provision for period from August 1, 2016 through December 31, 2016. ﻿ The Tax Cuts and Jobs Act (the "Act") was enacted on December 22, 2017. Among other things, the Act reduces the U.S. federal corporate tax rate from 34 percent to 21 percent, eliminates the alternative minimum tax (“AMT”) for corporations, and creates a one-time deemed repatriation of profits earned outside of the U.S. The tax rate reduction also resulted in a write-down of the net deferred tax asset of approximately $1.0 million. With the exception of the IPR&D noted below, the write-down of the net deferred tax asset related to the rate reduction resulted in a corresponding write-down of the valuation allowance of approximately $1.3 million. The Company recorded a deferred tax liability of $0.3 million as of December 31, 2017, related to the acquisition of the IPR&D. This deferred tax liability was recorded to account for the book versus tax basis difference related to the IPR&D intangible asset, which was recorded in connection with the Merger. This deferred tax liability was excluded from sources of future taxable income, as the timing of its reversal cannot be predicted due to the indefinite life of this IPR&D. As such, this deferred tax liability cannot be used to offset the valuation allowance. ﻿ Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s net deferred tax assets relate primarily to its net operating loss carryforwards and stock based compensation, offset by property and equipment and intangible assets. With the exception of the IPR&D, the Company has recorded a full valuat ion allowance to offset the net deferred tax assets, because it is not more likely than not that the Company will realize future benefits associated with these net deferred tax assets at December 31, 2017 and 2016. ﻿ At December 31, 2017 and 2016, the Company had net deferred tax assets of $1.5 million and $0.7 million, respectively, against which a valuation allowance of $1.8 million and $0.7 million, respectively, had been recorded. The valuation allowance excluded the deferred tax liability for IPR&D assigned as an indefinite life intangible asset for book purposes, also known as a “naked credit” in the amount of $0.3 million at December 31, 2017. The change in the valuation allowance for the year ended December 31, 2017 was an increase of $1.1 million. The increase in the valuation allowance for the year ended December 31, 2017 was mainly attributable to the reverse merger with Transgenomic, for which the Company obtained Transgenomic’s net operating losses, which were limited under the Internal Revenue Code Section 382. In addition, the increase was offset due to the recognition of deferred tax liabilities associated with the book versus tax basis difference of intangible assets purchased. There was also an offsetting decrease attributable to a decrease in the corporate tax rate. Significant components of the Company’s deferred tax assets at December 31, 2017 and 2016 are as follows: ﻿
﻿ |  |  |  |  |  |  |  |
﻿ |  | Dollars in Thousands
﻿ |  | 2017 |  | 2016
Deferred tax assets: |  |  |  |
﻿Net operating loss and credit carryforwards |  | $ | 5,907 |  |  | $ | 407 |
﻿Accrued interest |  | 2 |  |  | 164 |
﻿Stock-based compensation |  | 61 |  |  | — |
﻿Other |  | 22 |  |  | 110 |
﻿Gross deferred tax assets |  | 5,992 |  |  | 681 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
﻿ Property and equipment |  |  | (32 | ) |  |  | — |
﻿ Intangible assets |  |  | (4,145 | ) |  |  | — |
﻿ IPR&D intangible assets |  |  | (349 | ) |  |  | — |
﻿ Other |  |  | — |  |  |  | (16 | )
﻿Gross deferred tax liabilities |  |  | (4,526 | ) |  |  | (16 | )
﻿Net deferred tax assets |  |  | 1,466 |  |  |  | 665 |
﻿Less valuation allowance |  |  | (1,815 | ) |  |  | (665 | )
﻿Net deferred liability |  | $ | (349 | ) |  | $ | — |
﻿ The Company’s provision for income taxes for the year ended December 31, 2017 and for the period from August 1, 2016 through December 31, 2016 relates to income taxes in states and other jurisdictions and differs from the amounts determined by applying the statutory federal income tax rate to the loss before income taxes for the following reasons:
﻿ |  |  |  |  |  |  |  |
﻿ |  | Dollars in Thousands
﻿ |  | 2017 |  | For the period from August 1, 2016 through December 31, 2016
﻿Benefit at federal rate |  | $ | (7,331 | ) |  | $ | (421 | )
Increase (decrease) resulting from: |  |  |  |
﻿State income taxes—net of federal benefit |  | (101 | ) |  | (27 | )
﻿Miscellaneous permanent differences |  | 4 |  |  | 2 |
﻿Warrant liability revaluation |  | 81 |  |  | — |
﻿Capitalized transaction cost |  | 958 |  |  | — |
﻿Impairment of goodwill |  | 3,334 |  |  | — |
﻿Enactment of Tax Cuts and Jobs Act |  | 1,041 |  |  | — |
﻿Change in valuation allowance |  | 2,014 |  |  | 446 |
﻿Total income tax expense (benefit) |  | $ | — |  |  | $ | — |
﻿ttttttthh |  |  |  |  |  |  |  |
﻿ ﻿ ﻿ ﻿ ﻿ ﻿ The income tax expense consists of the following at December 31, 2017 and 2016. ﻿
﻿ |  | Dollars in Thousands
﻿ |  | 2017 |  | 2016
Federal: |  |  |  |
﻿Current |  | $ | — |  |  | $ | — |
﻿Deferred |  | — |  |  | — |
﻿Total Federal |  | $ | — |  |  | $ | — |
State: |  |  |  |
﻿Current |  | $ | — |  |  | $ | — |
﻿Deferred |  | — |  |  | — |
﻿Total State |  | $ | — |  |  | $ | — |
Foreign: |  |  |  |
﻿Current |  | $ | — |  |  | $ | — |
﻿Deferred |  | — |  |  | — |
﻿Total Foreign |  | $ | — |  |  | $ | — |
﻿Total Tax Provision |  | $ | — |  |  | $ | — |
﻿ ﻿ The Company had approximately $27 million and $1.0 million of available gross federal and state net operating loss (“NOL”) carryforwards as of December 31, 2017 and 2016, respectively. Section 382 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change in ownership in excess of 50% over a three-year period, the amount of the NOL carryforwards that the Company may utilize in any one year may be limited. The Company reduced its tax attributes (NOLs and tax credits) obtained from the Merger with Transgenomic and the limitation placed on the utilization of its tax attributes, as a substantial portion of the NOLs and tax credits generated prior to the Merger will likely expire unused. ﻿ At December 31, 2017 and 2016, and as a result of the limitations under Section 382 of the Internal Revenue Code, the Company had a total of unused federal tax net operating loss carryforwards with expiration dates as follows: ﻿
﻿ |  |  |  |  |
﻿ | Dollars in Thousands
﻿ |  | 2017 |  |  | 2016 |
﻿2036 | $ | 17,781 |  | $ | 967 |
﻿2037 |  | 9,109 |  |  | — |
﻿Total Federal | $ | 26,890 |  | $ | 967 |
﻿ The Company has adopted guidance on accounting for uncertainty in income taxes which clarified the accounting for income taxes by prescribing the minimum threshold a tax position is required to meet before being recognized in the financial statements as well as guidance on de-recognition, measurement, classification and disclosure of tax positions. There are no material uncertain tax positions that would require recognition in the financial statements. The Company is obligated to file income tax returns in the U.S. federal jurisdiction and various U.S. states. Since the Company had losses in the past, all prior years that generated NOLs are open and subject to audit examination in relation to the NOL generated from those years. Our evaluation of uncertain tax positions was performed for the tax years ended December 31, 2014 and forward.

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