Income Taxes –The deconsolidation of Asterias and OncoCyte financial statements from BioTime were not taxable transactions and did not create a current income tax payment obligation. The market value of the Asterias and OncoCyte shares we hold creates a deferred tax liability to us based on the closing market price of the shares, less our tax basis in the shares. The deferred tax liability generated by the Asterias and OncoCyte shares that we hold is a source of taxable income to us that will more likely than not result in the realization of our deferred tax assets to the extent of those deferred tax liabilities. Because the deferred tax liabilities are determined based on the closing prices of those shares and, due to the inherent unpredictability of future prices of those shares, we cannot reliably estimate or project those deferred tax liabilities on an annual basis. Therefore, the deferred tax liabilities pertaining to Asterias and OncoCyte shares, measured as of the period end being reported on, and the related impacts to the valuation allowance changes and deferred tax assets, are recorded in the interim period in which they occur.
A valuation allowance is provided when it is more likely than not that some portion of our deferred tax assets will not be realized.
As of June 30, 2017, our federal deferred tax assets exceeded our deferred tax liabilities reflecting the Asterias and OncoCyte deferred tax liabilities generated on and after the respective dates of the Asterias Deconsolidation and the OncoCyte Deconsolidation, and changes to those deferred tax liabilities due to changes in the Asterias and OncoCyte stock prices through June 30, 2017. Accordingly, as of June 30, 2017, we established a full valuation allowance on our deferred tax assets and reversed the $3.9 income tax provision we had recorded in the first quarter of 2017, resulting in no income tax provision or benefit for the six months ended June 30, 2017. For state income tax purposes, we have a full valuation allowance on our state deferred tax assets as of June 30, 2017, and December 31, 2016 and, accordingly, we did not record any state tax provision or benefit for all periods presented.
We had established a full valuation allowance as of December 31, 2016 and 2015 due to the uncertainty of realizing future tax benefits from our net operating loss carryforwards and other deferred tax assets. Accordingly, we did not record any provision or benefit for income taxes for the six months ended June 30, 2017.
We expect that deferred income tax expense or benefit we record each reporting period, if any, will vary depending on the change in the closing stock prices of Asterias and OncoCyte from period to period and the related changes in those deferred tax liabilities and our deferred tax assets and other credits, including changes in the valuation allowance, for each period.
Liquidity and Capital Resources
At June 30, 2017, we had $15.8 million of cash, cash equivalents, and available for sale securities on hand. We also hold shares of Asterias and OncoCyte common stock which had a combined market value of $153.5 million at June 30, 2017. Although we have no present plans to liquidate our holdings of Asterias or OncoCyte shares, if we need near term working capital or liquidity to supplement our cash and cash equivalents for our operations, we may sell some or all of our Asterias or OncoCyte shares, as necessary. The market value shown may not represent the amount that could be realized in a sale of Asterias or OncoCyte shares due to various market and regulatory factors, including trading volume or market depth factors and volume and manner of sale restrictions under Federal securities laws, prevailing market conditions and prices at the time of any sale, and subsequent sales of securities by the subsidiaries.
Since inception, we have incurred significant operating losses and have funded our operations primarily through the issuance of equity securities, payments from research grants, royalties from product sales and sales of research products and services. At June 30, 2017, we had an accumulated deficit of approximately $159 million, working capital of $12 million and shareholders’ equity of $178 million. We have evaluated our projected cash flows and we believe that our $15.8 million in cash, cash equivalents, and available for sale securities and, the combined value of $153.5 million in Asterias and OncoCyte shares, at June 30, 2017, provide sufficient cash, cash equivalents, and liquidity to carry out our current operations through at least twelve months from the issuance date of the consolidated financial statements included elsewhere in this report.
Our projected cash flows are subject to various risks and uncertainties. For example, clinical trials being conducted for our OpRegen® program will be funded in part with funds from grants and not from cash on hand. If we were to lose our grant funding or we are unable to continue to provide working capital to the OpRegen® program, or both, we may be required to delay, postpone, or cancel our clinical trials or limit the number of clinical trial sites, or otherwise reduce or curtail our operations unless we are able to obtain adequate financing from another source that could be used for our clinical trials. The unavailability or inadequacy of financing to meet future capital needs could force us to modify, curtail, delay, or suspend some or all aspects of our planned operations. Our determination as to when we will seek new financing and the amount of financing that we will need will be based on our evaluation of the progress we make in our research and development programs, any changes to the scope and focus of those programs, and projection of future costs, revenues, and rates of expenditure. We cannot assure that adequate financing will be available on favorable terms, if at all. Sales of additional equity securities by us or our subsidiaries and affiliates could result in the dilution of the interests of present shareholders.
Upon completion of the offer and sale of AgeX common stock to new investors, AgeX will have $10 million of cash capital to fund its operations and early-stage, pre-clinical programs . However, we cannot assure that adequate financing will be available to AgeX in the future to fund the AgeX programs.