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 $2,731,015 and $1,538,220 of uncertain tax positions as of December 31, 2019 and 2018, respectively, related to certain tax credit carryforwards.

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, 2019 or 2018, and has not recognized interest or penalties during the years ended December 31, 2019 and 2018, since there was no reduction in income taxes paid due to uncertain tax positions. Management of the Company believes no significant change to the amount of unrecognized tax benefits will occur within the next 12 months.

	Years Ended December 31,
	2019			2018
U.S. pre-tax loss	$	(19,332,809	)	$	(16,406,443	)
Foreign pre-tax gain (loss)		38,524			(43,949	)
Loss before income taxes	$	(19,294,285	)	$	(16,450,392	)

	Years Ended December 31,
	2019		2018
Current:
Federal	$	—	$	—
State		3,379		3,526
Total current income tax expense	$	3,379	$	3,526

Deferred:
Federal	$	—	$	—
State		—		—
Total deferred income tax expense	$	—	$	—
Total income tax expense	$	3,379	$	3,526

The Company’s actual income tax expense for the years ended December 31, 2019 and 2018 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,
	2019			2018
Computed tax (benefit) at 21%	$	(4,051,800	)	$	(3,454,582	)
State taxes, net of federal benefit		(881,670	)		(384,035	)
Stock-based compensation		183,167			82,024
Foreign tax rate differential		4,298			(3,158	)
Return to provision		80,668			(31,111	)
Other		51,737			51,598
Research and development tax credit - state		(342,320	)		(511,845	)
Research and development tax credit - federal		(301,878	)		(506,364	)
Uncertain tax position adjustment for prior periods		650,687			1,029,115
Increase in valuation allowance		4,610,490			3,731,884
	$	3,379		$	3,526

	Years Ended December 31,
	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	38,357,970		$	33,431,082
Research and development credits		3,061,981			3,076,441
Deferred revenue		154,497			86,567
Inventory reserve		10,155			9,645
Fixed assets and intangibles		217,332			223,767
Accrued NuvoGen liability		1,456,435			1,720,335
Accrued expense		—			86,034
Lease liability		359,603			—
Other		150,134			106,913
Gross deferred tax assets		43,768,107			38,740,784
Valuation allowance		(43,350,682	)		(38,740,784	)
Deferred tax assets, net		417,425			—
Deferred tax liabilities:
Right of use asset		311,633			—
Other		105,792			—
Total deferred tax liabilities		417,425			—
Net deferred tax assets (liabilities)	$	—		$	—

As of December 31, 2019, the Company has estimated federal and state net operating loss (“NOL”) carryforwards of approximately $158,175,977 and $106,182,477 for federal and state income tax purposes, respectively. $121,776,595 of the Company’s federal NOLs are scheduled to expire from 2021 through 2037, while the remaining federal NOLs of $36,399,382 do not expire. The Company’s state NOLs are scheduled to expire from 2027 through 2039. The Company’s federal and state tax credit carryforwards begin expiring in 2021 and 2020, respectively.

For financial reporting purposes, valuation allowances of $43,350,682 and $38,740,784 at December 31, 2019 and 2018, 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 $4,609,898 for the year ended December 31, 2019 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 no longer negative evidence leading to the conclusion that it is more likely than not that the benefits will not be realized.

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. Sections 382 and 383 of the IRC place limitations on the usage of NOLs and credit carryforwards 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,
	2019		2018
Balance at beginning of year	$	1,538,220	$	—
Increases to prior positions		650,687	$	1,029,115
Increases for current year positions		542,108		509,105
Balance at end of year	$	2,731,015	$	1,538,220

As of December 31, 2019, the Company had $2,731,015 of gross unrecognized tax benefits, related to research and experimental tax credits. The Company had no unrecognized tax benefits as of December 31, 2019, 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, 2019, the earliest year subject to examination is 2016 for U.S. federal tax purposes. The earliest year subject to examination is 2015 for Arizona, California and Texas, 2016 for the remaining state jurisdictions, and 2019 for France. However, the Company’s NOLs and tax credit carryforwards for periods ending December 31, 2001 and thereafter remain subject to examination by the United States and certain states.