Auxilium Inc.

PART X, LINE 2:

“The company is generally exempt from federal and state income taxes under the provisions of section 501(c)(3) of the internal revenue code. In addition, the company has been determined by the internal revenue service (irs) not to be a private foundation. However, the company is subject to income taxes on unrelated business income, as defined by the irs. At september 30, 2018 and 2017, the company had no net taxable unrelated business income, and accordingly, no provision for income taxes is required in the accompanying consolidated financial statements. The company adopted the accounting standards on accounting for uncertainty in income taxes (financial accounting standards board (fasb) accounting standards codification topic 740-10), which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater-than-50-percent likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses de-recognition, classification, interest and penalties on income taxes, and accounting in interim periods. Management has evaluated the company's tax positions and concluded that the company had taken no uncertain tax positions that require adjustment to the consolidated financial statements to comply with provisions of the applicable accounting guidance. Generally, the company is no longer subject to u.s. Federal or state and local income tax examinations by tax authorities for tax years before 2014.”