GNLB » Topics » Income Taxes

These excerpts taken from the GNLB 10-K filed Mar 31, 2008.
Income Taxes
 
The Company uses the liability method of accounting for income taxes, and determines deferred tax assets and liabilities based on differences between the financial reporting and the tax reporting basis of assets and liabilities. The Company measures these assets and liabilities using enacted tax rates and laws that are scheduled to be in effect when the differences are expected to reverse. Because the realization of deferred tax assets is dependent upon future earnings, if any, and the Company’s future earnings are uncertain, all of the Company’s net deferred tax assets have been fully offset by a valuation allowance.
 
In June 2006, the FASB issued FASB Interpretation No. 48 “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109” (“FIN 48”). FIN 48 establishes a single model to address accounting for uncertainty in tax positions. FIN 48 clarifies the accounting for income taxes by prescribing a minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company adopted FIN 48 as of January 1, 2007, as required. The adoption of FIN 48 did not have an impact on our financial results or financial position for the year ended December 31, 2007.
 
Income
Taxes



 



The Company uses the liability method of accounting for income
taxes, and determines deferred tax assets and liabilities based
on differences between the financial reporting and the tax
reporting basis of assets and liabilities. The Company measures
these assets and liabilities using enacted tax rates and laws
that are scheduled to be in effect when the differences are
expected to reverse. Because the realization of deferred tax
assets is dependent upon future earnings, if any, and the
Company’s future earnings are uncertain, all of the
Company’s net deferred tax assets have been fully offset by
a valuation allowance.


 



In June 2006, the FASB issued FASB Interpretation No. 48
“Accounting for Uncertainty in Income Taxes — an
interpretation of FASB Statement 109” (“FIN 48”).
FIN 48 establishes a single model to address accounting for
uncertainty in tax positions. FIN 48 clarifies the accounting
for income taxes by prescribing a minimum recognition threshold
a tax position is required to meet before being recognized in
the financial statements. FIN 48 also provides guidance on
derecognition, measurement, classification, interest and
penalties, accounting in interim periods, disclosure and
transition. The Company adopted FIN 48 as of
January 1, 2007, as required. The adoption of FIN 48
did not have an impact on our financial results or financial
position for the year ended December 31, 2007.


 




This excerpt taken from the GNLB 10-K filed Mar 22, 2007.
Income Taxes
 
The Company uses the liability method of accounting for income taxes, and determines deferred tax assets and liabilities based on differences between the financial reporting and the tax reporting basis of assets and liabilities. The Company measures these assets and liabilities using enacted tax rates and laws that are scheduled to be in effect when the differences are expected to reverse. Because the realization of deferred tax assets is dependent upon future earnings, if any, and the Company’s future earnings are uncertain, all of the Company’s net deferred tax assets have been fully offset by a valuation allowance.


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Table of Contents

 
GENELABS TECHNOLOGIES, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
This excerpt taken from the GNLB 10-K filed Mar 31, 2006.
Income Taxes
 
The Company uses the liability method of accounting for income taxes, and determines deferred tax assets and liabilities based on differences between the financial reporting and the tax reporting basis of assets and liabilities. The Company measures these assets and liabilities using enacted tax rates and laws that are scheduled to be in effect when the differences are expected to reverse. Because the realization of deferred tax assets is dependent upon future earnings, if any, and the Company’s future earnings are uncertain, all of the Company’s net deferred tax assets have been fully offset by a valuation allowance.


F-10


Table of Contents

 
GENELABS TECHNOLOGIES, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
2.   Property and Equipment
 
The components of property and equipment are as follows:
 
                 
    2005     2004  
 
Laboratory equipment
  $ 5,788     $ 5,529  
Leasehold improvements
    4,655       4,655  
Office and other equipment
    2,725       2,693  
                 
      13,168       12,877  
Less accumulated depreciation and amortization
    (12,217 )     (11,786 )
                 
    $ 951     $ 1,091  
                 
 
There were no assets under capital lease at December 31, 2005. At December 31, 2004, an asset under capital lease is included in property and equipment at a cost of $309,000 with accumulated amortization of $144,000; this asset was purchased during 2005 pursuant to the lease agreement.
 
3.   Commitments and Contingencies
 
The Company leases its primary office and laboratory facilities under a non-cancelable operating lease that has a term expiring in November 2006. The Company is required to pay certain maintenance expenses in addition to monthly rent. At December 31, 2005, future minimum lease payments under the single operating lease with an original term greater than one year are $1,231,000, excluding sublease rentals, which is all due in 2006. Future minimum rental payments to be received by Genelabs under one noncancelable sublease agreement are $130,000, which is also due in 2006. Total lease expense, net of sublease income, was $1,443,000, $1,470,000 and $1,465,000 for 2005, 2004 and 2003, respectively.
 
To maintain its radioactive materials license, the Company has established a $150,000 standby letter of credit in favor of the Radiologic Health Branch of the California Department of Health Services. The letter of credit is secured by a certificate of deposit which is classified as restricted cash.
 
The Company, as permitted under California law and in accordance with its Bylaws, has entered into agreements with its officers and directors to pay certain expenses, as incurred, and to indemnify them, subject to certain limits, if the officer or director becomes involved in a lawsuit or other proceeding arising from his or her service to the Company. There is no specified termination date for the agreements and the maximum amount of potential future indemnification is unlimited. The Company has a director and officer insurance policy that may enable the Company to recover a portion of any future amounts paid pursuant to the Company’s indemnity obligations. The Company believes the fair value of its obligations under its indemnification commitments is minimal and at present no claims are being asserted against the Company for indemnification under these agreements. Accordingly, the Company has not recognized any liabilities relating to these agreements as of December 31, 2005.
 
The Company is subject to legal proceedings and claims that arise in the ordinary course of business. Management currently believes that the ultimate amount of liability, if any, with respect to any pending actions, either individually or in the aggregate, will not materially affect Genelabs’ financial position or results of operations. However, the ultimate outcome of any litigation is uncertain. If an unfavorable outcome were to occur, the impact could be material. Furthermore, any litigation, regardless of the outcome, can have an adverse impact on the Company’s results of operations as a result of defense costs, diversion of management resources, and other factors.


F-11


Table of Contents

 
GENELABS TECHNOLOGIES, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
4.   Shareholders’ Equity
 
This excerpt taken from the GNLB 10-K filed Mar 11, 2005.

8.    Income Taxes

        There is no provision for income taxes because the Company has incurred operating losses.

        Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryovers and temporary differences between the carrying amounts of assets and liabilities for financial

F-17



reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets as of December 31 are as follows:

 
  2004
  2003
 
Deferred tax assets:              
  Net operating loss carryforwards   $ 66,900   $ 61,000  
  Deferred revenue     4,600     900  
  Research credits     3,700     3,500  
  Capitalized research expenditures     2,400     1,500  
  Capital loss carryforwards     900      
  Foreign net operating losses         1,900  
  Other individually immaterial items, net     1,000     1,600  
   
 
 
  Total deferred tax assets     79,500     70,400  
Valuation allowance for deferred tax assets     (79,500 )   (70,400 )
   
 
 
Net deferred tax assets   $   $  
   
 
 

        Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. For 2004, 2003 and 2002, the valuation allowance increased by $9.1 million, $6.1 million and $5.7 million, respectively. Deferred tax assets at December 31, 2004 include approximately $2.9 million associated with stock option activity for which any subsequently recognized tax benefits will be credited directly to shareholder's equity.

        At December 31, 2004, the Company had net operating loss carryforwards for federal income tax purposes of approximately $189 million which expire in the years 2005 through 2024 and federal research and development tax credits of approximately $2.2 million which expire in the years 2005 through 2024. The Company's federal capital loss carryfowards of $2.4 million expire in 2009. In addition, the Company had net operating loss carryforwards for state income tax purposes of approximately $43 million which expire in the years 2005 through 2014 and state research and development tax credits of approximately $2.2 million which do not expire. Utilization of the Company's net operating loss and tax credit carryforwards may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such an annual limitation could result in the expiration of the net operating loss and tax credits before utilization.

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