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SEC Filings

10-K
SERES THERAPEUTICS, INC. filed this Form 10-K on 03/16/2017
Entire Document
 

 

SERES THERAPEUTICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(amounts in thousands, except share and per share data)

 

 

Net deferred tax assets as of December 31, 2016 and 2015 consisted of the following:

 

 

 

December 31,

 

 

 

2016

 

 

2015

 

Deferred tax assets:

 

 

 

 

 

 

 

 

Net operating loss carryforwards

 

$

18,481

 

 

$

25,293

 

Research and development tax credit carryforwards

 

 

14,991

 

 

 

4,180

 

Capitalized organization costs

 

 

483

 

 

 

527

 

Stock-based compensation expense

 

 

5,624

 

 

 

1,897

 

Charitable Contributions

 

 

6

 

 

 

5

 

Deferred Revenue

 

 

42,742

 

 

 

 

Accrued expenses

 

 

5,560

 

 

 

977

 

Capitalized research and development expenses

 

 

115

 

 

 

126

 

Total deferred tax assets

 

$

88,002

 

 

 

33,005

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

(5,008

)

 

 

(228

)

Total deferred tax liabilities

 

 

(5,008

)

 

 

(228

)

Valuation allowance

 

$

(82,994

)

 

 

(32,777

)

Net deferred tax assets

 

$

 

 

$

 

 

As of December 31, 2016, the Company had net operating loss carryforwards for federal and state income tax purposes of $47,165 and $46,296, respectively, which both begin to expire in 2031. As of December 31, 2016, the Company also had available research and development tax credit carryforwards for federal and state income tax purposes of $13,500 and $2,260, respectively, which begin to expire in 2031 and 2028, respectively. The federal research and development tax credits include an orphan drug credit carryforward of $8,473. Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. Since our formation, we have raised capital through the issuance of capital stock on several occasions. These financings, combined with the purchasing shareholders' subsequent disposition of those shares, may have resulted in a change of control as defined by Section 382 or could result in a change of control in the future upon subsequent disposition. We conducted an analysis under Section 382 to determine if historical changes in ownership through August 31, 2015 would limit or otherwise restrict our ability to utilize these NOL and R&D credit carryforwards. As a result of this analysis, we do not believe there are any significant limitations on our ability to utilize these carryforwards. However, future changes in ownership after August 31, 2015 could affect the limitation in future years. Any limitation may result in expiration of a portion of the NOL or R&D credit carryforwards before utilization. At December 31, 2016, $20,211 of the federal net operating loss carryforwards, and $20,211 of the state net operating loss carryforwards relate to excess stock based compensation tax benefits for which the benefit will be recorded to additional paid-in capital when recognized. The Company early adopted ASU 2016-09, and as such, as of December 31, 2016, those amounts have been recorded as a deferred tax asset and offset by a valuation allowance.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2016 and 2015. Management reevaluates the positive and negative evidence at each reporting period.

F-27



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