The Company provides for income taxes based upon management’s estimate of taxable income or loss for each respective period. The Company recognizes an asset or liability for the deferred tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. These temporary differences would result in deductible or taxable amounts in future years, when the reported amounts of the assets are recovered or liabilities are settled, respectively.

In each period since inception, the Company has recorded a valuation allowance for the full amount of its net deferred tax assets, as the realization of the net deferred tax assets is uncertain. As a result, the Company has not recorded any federal or state income tax benefit in the accompanying consolidated statements of operations; however, state income tax expense has been recorded for state minimum taxes.

The Company periodically reviews its filing positions for all open tax years in all U.S. federal, state and international jurisdictions where the Company is or might be required to file tax returns or other required reports.

The Company applies a two-step approach to recognizing and measuring uncertain tax positions. The Company evaluates the tax position for recognition by determining if the weight of available evidence indicates that it is “more likely than not” that the position will be sustained on audit, including resolution of related appeals or litigation process, if any. The term “more likely than not” means a likelihood of more than 50 percent. If the tax position is not more likely than not to be sustained in a court of last resort, the Company may not recognize any of the potential tax benefit associated with the position. The Company recognizes a benefit for a tax position that meets the more likely than not criterion at the largest amount of tax benefit that is greater than 50 percent likely of being realized upon its effective resolution. Unrecognized tax benefits involve management’s judgment regarding the likelihood of the benefit being sustained. The final resolution of uncertain tax positions could result in adjustments to recorded amounts and may affect the Company’s results of operations, financial position and cash flows. As discussed below, the Company has estimated $1,538,220 and $0 of uncertain tax positions as of December 31, 2018 and 2017, respectively.

The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at December 31, 2018 or 2017, and has not recognized interest or penalties during the years ended December 31, 2018 and 2017, since there was no reduction in income taxes paid due to uncertain tax positions. Management of the Company does not expect a material change to the amount of unrecognized tax benefits to occur within the next 12 months.

	Years Ended December 31,
	2018		2017
Current:
Federal	$	—	$	—
State		3,526		2,921
Total current income tax expense	$	3,526	$	2,921

Deferred:
Federal	$	—	$	—
State		—		—
Total deferred income tax expense	$	—	$	—
Total income tax expense	$	3,526	$	2,921

The Company’s actual income tax expense for the years ended December 31, 2018 and 2017 differ from the expected amount computed by applying the statutory federal income tax rate to loss before income taxes as follows:

	Years Ended December 31,
	2018			2017
Computed tax (benefit) at statutory rate (2018: 21%, 2017: 34%)	$	(3,454,582	)	$	(6,445,413	)
State taxes, net of federal benefit		(384,035	)		(532,952	)
Stock-based compensation		82,024			231,396
Foreign tax rate differential		(3,158	)		—
Return to provision		(31,111	)		(15,375	)
Other		51,598			20,292
Research and development tax credit - state		(511,845	)		(576,525	)
Research and development tax credit - federal		(506,364	)		(440,058	)
Federal rate change on deferred items as of enactment date		—			16,232,211
Uncertain tax position adjustment for prior periods		1,029,115			—
Increase (decrease) in valuation allowance		3,731,884			(8,470,655	)
	$	3,526		$	2,921

	Years Ended December 31,
	2018			2017
Deferred tax assets:
Net operating loss carryforwards	$	33,431,082		$	29,475,597
Research and development credits		3,076,441			3,114,091
Deferred revenue		86,567			204,061
Inventory reserve		9,645			15,134
Fixed assets and intangibles		223,767			147,395
Accrued NuvoGen liability		1,720,335			1,952,567
Accrued expense		86,034			24,500
Other		106,913			74,986
		38,740,784			35,008,331
Valuation allowance		(38,740,784	)		(35,008,331	)
Deferred tax asset, net	$	—		$	—

On December 22, 2017, the U.S. government enacted the Tax Act, which makes broad and complex changes to the IRC. Certain of these changes are applicable to the Company in 2018 and thereafter, including but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%, creating a new limitation on deductible interest expense, eliminating the corporate alternative minimum tax, modifying the rules related to uses and limitations of net operating loss carryforwards generated in tax years ending after December 31, 2017, enhancing bonus depreciation, and changing the rules pertaining to the taxation of profits earned abroad. Changes in tax rates and tax laws are accounted for in the period of enactment. The Tax Act reduced the corporate tax rate to 21% effective January 1, 2018. Consequently, the Company recorded a decrease related to deferred tax assets of $16,232,211, exclusive of the corresponding change in the valuation allowance, as of December 31, 2017. Due to the full valuation allowance on the deferred tax assets, there was no net adjustment to deferred tax expense or benefit for the year ended December 31, 2017, resulting from the reduction of the corporate tax rate.

As of December 31, 2018, the Company has estimated federal and state net operating loss (“NOL”) carryforwards of approximately $138,759,835 and $89,208,791 for federal and state income tax purposes, respectively. The Company’s federal NOLs are scheduled to expire from 2021 through 2038. The Company’s state NOLs are scheduled to expire from 2027 through 2038. The Company has an estimated French NOL carryforward of $38,618 as of December 31, 2018, with no expiration date. The Company’s federal and state tax credit carryforwards begin expiring in 2021 and 2019, respectively. The Company’s federal NOL carryforwards have the following expiration dates:

	Year of Expiration	Carryforwards
Federal NOL carryforwards
	2021	$	211,806
	2023		1,635,651
	2024		1,217,290
	2025		1,409,498
	2026		1,175,594
	2027		1,676,458
	2028		3,037,785
	2029		3,753,314
	2030		623,235
	2031		5,435,312
	2032		10,913,787
	2033		12,095,966
	2034		14,190,409
	2035		21,112,183
	2036		24,302,042
	2037		18,986,265
	2038		16,983,240
		$	138,759,835

For financial reporting purposes, valuation allowances of $38,740,784 and $35,008,331 at December 31, 2018 and 2017, respectively, have been established to offset deferred tax assets relating primarily to NOLs and research and development credits. The increase in the valuation allowance of $3,732,453 for the year ended December 31, 2018 was primarily due to increased operating losses. The Company has established a valuation allowance against its entire tax asset. As a result, the Company does not recognize any tax benefit until it is in a taxpaying position or there is sufficient positive evidence leading to the conclusion that it is more likely than not to realize the tax benefit.

A preliminary analysis of past and subsequent equity offerings by the Company, and other transactions that have an impact on the Company’s ownership structure, concluded that the Company may have experienced one or more ownership changes under Sections 382 and 383 of the IRC. Provisions of the IRC place special limitations on the usage of NOLs and credits following an ownership change. Such limitations may limit or eliminate the potential future tax benefit to be realized by the Company from its accumulated NOLs and research and development credits.

A reconciliation of the Company’s gross unrecognized tax benefits is as follows:

	Years Ended December 31,
	2018		2017
Balance at beginning of year	$	—	$	—
Increases to prior positions		1,029,115
Increases for current year positions		509,105		—
Balance at end of year	$	1,538,220	$	—

As of December 31, 2018, the Company had $1,538,220 of gross unrecognized tax benefits, related to research and experimental tax credits. The Company had no unrecognized tax benefits as of December 31, 2018, which, if recognized, would affect the annual effective tax rate, due to the full valuation allowance on the deferred tax assets.

The Company files income tax returns in the United States, Arizona, California, Texas, various other state jurisdictions, and France, with varying statutes of limitations. As of December 31, 2018, the earliest year subject to examination is 2015 for U.S. federal tax purposes. The earliest year subject to examination is 2014 for Arizona, California and Texas, 2009 for the remaining state jurisdictions, and 2018 for France. However, the Company’s NOL carryforwards for periods ending December 31, 2001 and thereafter remain subject to examination by the United States and certain states.