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S-1
PROTEON THERAPEUTICS INC filed this Form S-1 on 09/16/2014
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Proteon Therapeutics, Inc.

Notes to Financial Statements (Continued)

13. Income Taxes (Continued)

        A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations follows (in thousands):

 
  Years Ended
December 31,
 
 
  2012   2013  

Income tax benefit using U.S. federal statutory rate

  $ (2,710 ) $ (2,690 )

Permanent differences

    38     299  

State income taxes, net of federal benefit

    (368 )   (389 )

Tax credits

    (95 )   (7,164 )

Expiring net operating losses and tax credits

    287     2,566  

Change in the valuation allowance

    2,988     7,286  

Other

    (140 )   92  
           

  $   $  
           
           

        The significant components of the Company's deferred tax assets are as follows (in thousands):

 
  Years Ended
December 31,
 
 
  2012   2013  

Net operating loss carryforwards

  $ 26,560   $ 26,304  

Federal and state tax credits

    2,777     9,941  

Deferred revenue

    1,139     1,147  

Accrued expenses

    155     332  

Patents

    692     612  

Other

    27     300  
           

    31,350     38,636  

Valuation allowance

    (31,350 )   (38,636 )
           

Net deferred tax asset

  $   $  
           
           

        Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company's history of operating losses, management of the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of December 31, 2012 and 2013.

        The valuation allowance increased approximately $7.3 million during the year ended December 31, 2013, due primarily to the addition of Orphan Drug Tax credits for 2009 through 2012 as well as the generation of net operating losses during the year ended December 31, 2013, both of which are fully reserved. The valuation allowance increased approximately $3.0 million during the year ended December 31, 2012, due primarily to the generation of net operating losses during the period.

        Subject to the limitations described below, as of December 31, 2012 and 2013, the Company has net operating loss carryforwards of approximately $70.3 million and $69.9 million, respectively, to offset future federal taxable income, which will expire at various times between 2026 and 2033. The Company does not have any net operating losses that are attributable to excess stock option deductions which would be

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