From AFFY SEC fillings:
10-K *** December 31, 2013, we had federal and state net operating loss carryforwards of $481.0 million and $491.0 million, respectively. The federal net operating loss carryforwards begin to expire in 2028 and state net operating loss carryforwards begin to expire in 2018, if not utilized. At December 31, 2013, we had federal and state research credit carryforwards of $9.0 million and $7.0 million, respectively. The federal credits begin to expire, if not utilized, in 2022 and state credits are carried forward indefinitely.
13-D***Reporting Persons have recently engaged, and intend to continue to engage, in discussions with the Issuer’s management and board of directors (the “Board”) regarding a proposal to acquire a more significant equity interest in the Issuer as an alternative to the Issuer’s existing plan of liquidation (the “Plan of Liquidation”). According to the Issuer’s Definitive Proxy Statement on Schedule 14A filed on August 18, 2014, the Issuer’s shareholders are estimated to receive between $0.05 and $0.06 per Share under the Plan of Liquidation. On August 20, 2014, Xstelos proposed a transaction whereby it would tender, at $0.10 per Share, for up to 25% of the outstanding Shares of the Issuer, subject to limitations under Section 382 of the Internal Revenue Code of 1986, as amended, which the Reporting Persons are prepared to review at their own expense. There would be no minimum condition. This proposal was subject to negotiating an acceptable agreement with the Issuer, including without limitation board representation following the closing of the tender. The Reporting Persons believe that their proposal, at $0.10 per Share, will offer significantly more value to the Issuer’s shareholders than the Plan of Liquidation while preserving the Issuer’s ability to benefit from its net operating loss carryforwards. As of the date hereof, the Reporting Persons have not received a response from the Issuer.
See my next reply...
And Mr. Couchman won! Congrats to those holding.... Now let see what happen in the next weeks. I hope they can bring Omontys back( at least subcutaneous- no allergic reaction presented)+ new assets and we can recover our losses with some extra profits( if you average down like me).
After looking at Xstelos Holdings and their experience with other companies, I can see why they want to grab AFFY NOLs and patents. This people have the connections to bring Omontys back or at least sell the patents to the highest potential bidder....
Hopefully your post is not modeled after the gwp posts where half truths are used to mislead investors.
We've seen this before. Look at management's evaluation of NOLs and tell us how the change in control hasn't already happened.
If you could explain the 50% threshold and the three year periods it might make thing clearer. The description of change of control is a bit confusing. I can't imagine that a single 5% shareholder changing their position would trigger the loss of the NOLs but that's what it looks like. So please help us understand what it all means.
The law is ambiguous in some aspects depending on the situation( you can review the Sirius XM Holdings, American Airlines and the Washington Mutual cases to see my point). Is a very complex topic. The people in Xstelos seems to have the require knowledge to work something out . You can check their background and their experience in mergers and acquisitions. Based on their 13-D is very clear that they did the initial DD on the AFFY NOLs and their value. Obviously they have a big law firm on their side to make sure everything work in their favor.
Please do a web search for : Monetizing Life Sciences Company Net Operating Losses.
****As in most high-risk businesses, tax losses are an important consideration for life science startups. Indeed, given that only one company in 20 or 30 ultimately succeeds, a tax loss is frequently the only asset the company generates. How well that card is played can make a big difference in mitigating investor losses. In some circumstances, accumulated net operating losses (NOLs) can even serve as the keystone of a successful successor company****
*****Fortunately, a number of planning strategies can mitigate the impact of Section 382 and preserve some or all of the value of your NOLs. The easiest thing to do is to never cross the 50% investment threshold until each three-year testing period is over. The NOLs are then completely available to the company without limitation. This method to retain the value of NOLs requires close scrutiny to any new equity issuances.
*****Finally, if the cash hasn’t run out when the company decides to stop its development activities, it is sometimes possible to use the NOL in a strategic way by selling all the assets and using the remaining cash to buy profitable income streams in the same line of business (i.e., life sciences). This is effectively an arbitrage strategy in which an acquisition is made at a taxable discount rate, but application of the NOLs makes the acquisition’s income non-taxable. This technique has been used in the life sciences context by loss companies that acquired with leverage pharma royalty streams at a taxable discount rate but subject to the NOL shelter. At a 40% state and federal tax rate, this adds 40% unleveraged cash flow and significantly greater returns on a leveraged basis.