Income Taxes

provision for federal and state income tax expense has been recorded for the years ended

December

31,

2019

and

2018

due to the valuation allowance recorded against the net deferred tax asset and recurring losses.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows at

December

31,

2019

and

2018:

	2019			2018
Deferred income tax assets:
Tax loss carryforwards	$	42,107,372		$	30,239,898
Deferred revenue		—			1,856,507
Research and development credits		3,016,889			2,382,047
Stock-based compensation		973,905			489,694
Lease liability		1,508,645			—
Compensation		564,572			431,649
Fixed assets		—			160,784
Patent amortization		86,985			97,942
Other		55,972			669,151
Valuation allowance		(47,505,967	)		(36,327,672	)
Total deferred income tax assets		808,373			—
Deferred income tax liabilities:
Fixed assets		158,787			—
Operating leases		649,586			—
Total deferred income tax liabilities		808,373			—
Total net deferred tax	$	—		$	—

As of

December

31,

2019

and

2018,

the Company established a full valuation allowance against its net deferred tax assets since, at the time, the Company could

not

assert that it was more likely than

not

that its deferred tax assets would be realized. As a result, there was an increase in the valuation allowance in

2019

$11,178,295.

As of

December

31,

2019,

the Company had federal and state income tax loss carryforwards of

$97,268,927

and

$184,191,027,

respectively, which begin to expire in

2024

for federal purposes and in

2019

for state purposes. As of

December 31, 2019,

the Company had federal and state income tax loss carryforwards of

$85,765,810

and

$778,925,

respectively, which carryforward indefinitely. In addition, the Company has tax credit carryforwards for federal tax purposes of

$3,175,600

as of

December

31,

2019,

which begin to expire in

2026.

The utilization of net operating loss and tax credit carryforwards to reduce future income taxes will depend on the Company’s ability to generate sufficient taxable income prior to the expiration of the loss carryforwards.

The Internal Revenue Code of

1986,

as amended, contains provisions which limit the ability to utilize the net operating loss carryforwards in the case of certain events, including significant changes in ownership interests. If the Company’s net operating loss carryforwards are limited, and the Company has taxable income which exceeds the permissible yearly net operating loss carryforwards, the Company would incur a federal income tax liability even though net operating loss carryforwards would be available in future years.

The reasons for the difference between actual income tax expense for the years ended

December

31,

2019

and

2018

and the amount computed by applying the statutory federal income tax rate to income before income tax are as follows:

	2019						2018
				% of Pretax						% of Pretax
	Amount			Earnings			Amount			Earnings
Income tax benefit at statutory rate	$	(10,019,974	)		21.0	%	$	(11,158,530	)		21.0	%
State income taxes, net of federal tax benefit		(957,616	)		2.0			(1,062,492	)		2.0
Non-deductible expenses		94,903			(0.2	)		6,810			—
Stock-based compensation		258,338			(0.5	)		10,925			—
Non-deductible interest expense		—			—			4,074,501			(7.7	)
Derivative and warrant fair value adjustments		—			—			(63,873	)		0.1
Credits		(634,842	)		1.3			—			—
Change in state rate		3,887			—			(2,842	)		—
Other		77,009			(0.1	)		(139,660	)		0.3
Change in valuation allowance		11,178,295			(23.5	)		8,335,161			(15.7	)
Provision for income taxes	$	—			0.0	%	$	—			0.0	%

The Company has determined that there

may

be a future limitation on the Company’s ability to utilize its entire federal R&D credit carryover. Therefore, the Company recognized an uncertain tax benefit associated with the federal R&D credit carryover during the years ended

December

31,

2019

and

2018,

as follows:

Balance at December 31, 2017	$	—
Increases related to 2018		—
Increases related to prior periods		—
Balance at December 31, 2018		—
Increases related to 2019		158,710
Increases related to prior periods		—
Balance at December 31, 2019	$	158,710

The Company recognizes 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 the taxing authorities based on the technical merits of the position. The Company has determined that it had

other material uncertain tax benefits for the year ended

December

31,

2019.The

Company’s policy for recording interest and penalties related to uncertain tax provisions is to record them as a component of the provision for income taxes. The Company did

not

have any accrued interest or penalties associated with any unrecognized tax positions as of

December

31,

2019

and

2018,

and there were

such interest or penalties recognized during the years ended

December

31,

2019

and

2018.

The Company has all tax years open to examination by federal tax and state tax jurisdictions.

income tax returns are currently under examination by taxing authorities.