provision for income taxes for interim periods is determined using an estimated annual effective tax rate as prescribed by ASC
740-270, Income Taxes, Interim Reporting. The effective tax rate may be subject to fluctuations during the year as new
information is obtained, which may affect the assumptions used to estimate the annual effective tax rate, including factors such
as valuation allowances and changes in valuation allowances against deferred tax assets, the recognition or de-recognition of
tax benefits related to uncertain tax positions, if any, and changes in or the interpretation of tax laws in jurisdictions where
BioTime conducts business. ASC 740-270 also states that if an entity is unable to reliably estimate a part of its ordinary income
or loss, the income tax provision or benefit applicable to the item that cannot be estimated shall be reported in the interim
period in which the item is reported.
items that BioTime cannot reliably estimate on an annual basis (principally unrealized gains or losses generated
by changes in the market prices of the Asterias and OncoCyte shares BioTime holds), BioTime uses the actual year to date effective
tax rate rather than an estimated annual effective tax rate to determine the tax effect of each item, including the use of all
available net operating losses and other credits or deferred tax assets.
the deconsolidation of Asterias and OncoCyte were not taxable transactions to BioTime and did not create a current income tax
payment obligation to BioTime, the market value of the shares of Asterias and OncoCyte common stock BioTime holds creates a deferred
tax liability to BioTime based on the closing prices of the shares, less BioTime’s tax basis in the shares. The deferred
tax liability generated by the Asterias and OncoCyte shares that BioTime holds as of March 31, 2018 is a source
of future taxable income to BioTime, as prescribed by ASC 740-10-30-17, that will more likely than not result in the realization
of its deferred tax assets to the extent of the deferred tax liability. This deferred tax liability is determined based
on the closing prices of the Asterias and OncoCyte shares as of March 31, 2018. Due to the inherent unpredictability of future
prices of those shares, BioTime cannot reliably estimate or project those deferred tax liabilities on an annual basis. Therefore,
the deferred tax liability pertaining to Asterias and OncoCyte shares, determined based on the actual closing prices on the last
stock market trading day of the applicable accounting period, and the related impacts to the valuation allowance and deferred
tax asset changes, are recorded in the accounting period in which they occur.
March 23, 2018, Ascendance was acquired by a third party in a merger through which AgeX received approximately $3.2 million
in cash for its shares of Ascendance common stock. For financial reporting purposes, AgeX recognized a $3.2 million gain as a
sale of its equity method investment in Ascendance (see Note 9). The
sale was a taxable transaction to AgeX generating a taxable gain of approximately $2.2 million. BioTime has sufficient current
year losses from operations to offset the entire gain resulting in no income taxes due.
valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized.
For federal and state income tax purposes, as a result of the deconsolidation of Asterias and OncoCyte and the deferred tax liabilities
generated from the market values of Asterias and OncoCyte shares from the respective deconsolidation dates, including the changes
to those deferred tax liabilities due to changes in the Asterias and OncoCyte stock prices, BioTime’s deferred tax assets
exceeded its deferred tax liabilities as of March 31, 2018 and December 31, 2017. As a result, BioTime established a full valuation
allowance as of March 31, 2018 and December 31, 2017 due to the uncertainty of realizing future tax benefits from its net operating
loss carryforwards and other deferred tax assets. Accordingly, BioTime did not record any provision or benefit for income taxes
for the three months ended March 31, 2018.
of March 31, 2017, for federal income tax purposes, BioTime’s deferred tax liabilities exceeded its deferred tax assets
by $3.9 million and, accordingly, BioTime released its entire valuation allowance and recognized a federal deferred income tax
expense of $3.9 million during the three months ended March 31, 2017.
state income tax purposes, BioTime has a full valuation allowance on its state deferred tax assets for all periods presented and,
accordingly, no state tax provision or benefit was recorded for any period presented.