Annual report pursuant to Section 13 and 15(d)

RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

v3.10.0.1
RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
12 Months Ended
Dec. 31, 2018
Accounting Changes and Error Corrections [Abstract]  
RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS
The U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act made broad complex changes to the U.S. tax code including but not limited to, reduction of the U.S. federal corporate tax rate from 35% to 21%, requiring companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred, creating new taxes on certain foreign sourced earnings and additional limitations on the deductibility of interest, and allowing for the indefinite carryforward of net operating losses (“NOL”) arising in a taxable year after December 31, 2017, which would be considered an indefinite lived asset. The future use of these NOLs as a deduction are limited to 80% of taxable income in a single year, and the carryback of these NOLs to offset prior year taxable income is no longer permitted. The Company recorded a provisional deferred income tax benefit of $3.2 million in the period ended December 31, 2017 related to the change in the corporate tax rate from 35% to 21%. However, as a result of the Tax Act, deferred tax assets related to any deductible temporary differences, other than NOLs, that will reverse in future periods will convert to NOL carryforwards with an indefinite carryforward period. This allows U.S. federal deferred tax liabilities for indefinite lived intangible assets to be used as a source of income for U.S. federal indefinite lived deferred tax assets when determining if a valuation allowance is needed for these U.S. federal non-NOL deferred tax assets. No valuation allowance reversal relating to this was recorded in the period of enactment, resulting in the Company concluding that the previously issued 2017 consolidated financial statements were misstated. Accordingly, the Company has restated its 2017 consolidated financial statements to reflect the impact of releasing a portion of the previously reported valuation allowance associated with the expected reversal of the U.S. federal non-NOL deferred tax assets. This resulted in an increase in the deferred income tax benefit for 2017 of $3.2 million and a corresponding increase to net income and earnings per share.
These errors had no impact on any period prior to 2017, and, further, there is no impact on the previously disclosed cash taxes and the effect of the restatement to the consolidated statements of cash flows is limited to changes within operating activities as noted below, and, therefore, there are no impacts on the operating, investing or financing subtotals. Refer to Note 16, “Quarterly Results of Operations (Unaudited),” for the impact of correcting these previously reported errors on our unaudited quarterly results.
The impacts of the $3.2 million adjustment to income tax benefit for 2017 is as follows:
 
Year Ended
 
December 31, 2017
 
As Reported
 
As Restated
Consolidated Statements of Operations and Comprehensive Income (Loss):
 
 
 
Income tax (benefit) expense
$
(2,024,130
)
 
$
(5,224,875
)
Net income (loss)
$
3,834,136

 
$
7,034,881

Comprehensive income (loss)
$
5,586,742

 
$
8,787,487

Basic net income (loss) per share
$
0.15

 
$
0.27

Diluted net income (loss) per share
$
0.15

 
$
0.27


 
As of
 
December 31, 2017
 
As Reported
 
As Restated
Consolidated Balance Sheets:
 
 
Deferred tax liabilities
$
5,600,721

 
$
2,399,976

Total long-term liabilities
$
18,986,164

 
$
15,785,419

Total liabilities
$
45,304,958

 
$
42,104,213

Accumulated deficit
$
(181,568,757
)
 
$
(178,368,012
)
Total equity
$
71,093,218

 
$
74,293,963

Total liabilities and stockholders’ equity
$
116,398,176

 
$
116,398,176


 
Year Ended
 
December 31, 2017
Consolidated Statements of Cash Flows:
As Reported
 
As Restated
Net income (loss)
$
3,834,136

 
$
7,034,881

Deferred tax (benefit) expense
$
(2,267,404
)
 
$
(5,468,149
)

The impacts of the restatement have been reflected throughout the financial statements, including the applicable footnotes, as appropriate.