Income Taxes

The Company accounts for income taxes using the asset and liability method. Deferred taxes are determined by calculating the future tax consequences attributable to differences between the financial accounting and tax bases of existing assets and liabilities. A valuation allowance is recorded against deferred tax assets when, in the opinion of management, it is more likely than

not

that the Company will

not

be able to realize the benefit from its deferred tax assets.

The Company files income tax returns, as prescribed by the national, state and local jurisdictions in which it operates. The Company’s uncertain tax positions are related to tax years that remain subject to examination and are recognized in the financial statements when the recognition threshold and measurement attributes are met. Interest and penalties related to tax deficiencies and uncertain tax positions are recorded as income tax expense.

Income (loss) from continuing operations consists of the following:

	For the Year Ended December 31,
	2019			2018
US operations	$	(3,030,960	)	$	(3,345,925	)
Foreign operations		(131,704	)		(361,522	)
	$	(3,162,664	)	$	(3,707,447	)

The provision for income taxes charged to continuing operations is

for all periods presented.

Deferred tax assets (liabilities) were comprised of the following as of the periods presented below:

	As of December 31,
	2019			2018
Deferred tax assets:
Operating loss carryforwards	$	36,577,000		$	35,706,000
Accrued expenses		5,940,000			5,953,000
Tax credit carryforwards		4,017,000			3,951,000
Intellectual property		4,049,000			3,996,000
Equipment		71,000			110,000
Total deferred tax assets		50,654,000			49,716,000
Deferred tax liabilities:		—			—
Net deferred tax asset		50,654,000			49,716,000
Valuation allowance		(50,654,000	)		(49,716,000	)
	$	—		$	—

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate of

21%

for the year ended

December 31,

2019

and

December 31,

2018

, to the pretax loss from continuing operations as a result of the following differences:

	For the Year Ended December 31,
	2019			2018
Tax at the U.S. statutory rate	$	(664,000	)	$	(779,000	)
Change in value of warrant liability		(15,000	)		(202,000	)
Valuation allowance		679,000			981,000
Other		—			—
	$	—		$	—

December

31,

2019

, the Company had U.S. federal net operating loss carryforwards of approximately

$147.2

million, of which

$139.7

million begins to expire if

not

utilized by

2023,

and

$7.5

million, which has

expiration, and approximately

$4.2

million of tax credit carryforwards which begin to expire if

not

utilized by

2024.

The Company also has state net operating loss carryforwards of approximately

$93.4

million, which begin to expire if

not

utilized by

2027

and state tax credit carryforwards of approximately

$0.3

million, which begin to expire if

not

utilized by

2022.

The purchase of

6,459,948

shares of common stock by Mr. Davidovich on

July

2015

resulted in Mr. Davidovich owning

60.2%

of the Company, at that time. We therefore believe it highly likely that this transaction will be viewed by the U.S. Internal Revenue Service as a change of ownership as defined by Section

382

of the Internal Revenue Code. Consequently, our ability to utilize approximately

$124.8

million of U.S. federal net operating loss carryforwards,

$3.65

million of U.S. tax credit carryforwards, approximately

$73.4

million of state net operating loss carryforwards, and

$324,000

of state tax credit carryforwards, all of which occurred prior to

July 9, 2015,

are limited. As such, a significant portion of these carryforwards will likely expire before they can be utilized, even if the Company is able to generate taxable income that, except for this transaction, would have been sufficient to fully utilize these carryforwards.

ASC

740

requires that deferred tax assets be reduced by a valuation allowance if it is more likely than

not

that some portion or all of a deferred tax asset will

not

be realized. The ultimate realization of a deferred tax asset is dependent upon the generation of future taxable income during the periods in which those temporary differences are deductible. In making this determination, management considers all available positive and negative evidence affecting specific deferred tax assets, including the Company's past and anticipated future performance, the reversal of deferred tax liabilities, length of carry-back and carry-forward periods and the implementation of tax planning strategies. Based on all available evidence, management has determined that a full valuation allowance was necessary at

December 31,

2019

and

2018

The Company files U.S. federal income tax returns, along with various state and foreign income tax returns. All federal, state and foreign tax returns for the years ended

December

31,

2018,

2017

and

2016

are still open for examination.

The following presents a roll-forward of the unrecognized tax benefits and the associated interest and penalties:

	Unrecognized Tax Benefits		Interest and Penalties
Balance at January 1, 2018	$	493,000	$	—
Deferred tax position		11,000		—
Balance at December 31, 2018		504,000		—
Deferred tax position		6,000		—
Balance at December 31, 2019	$	510,000	$	—