Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Note 5 — Income Taxes:

The Company's U.S. and foreign loss before income taxes are set forth below:

	December 31,
	2019			2018
United States	$	(20,943,703	)	$	(25,882,114	)
Foreign		(550,149	)		(947,516	)
Total	$	(21,493,853	)	$	(26,829,630	)

There were no current or deferred income tax provision for the years ended December 31, 2019 and 2018 because the Company has incurred operating losses since inception.

The Company's deferred tax assets consist of the following:

	December 31,
	2019			2018
Net operating loss carryforwards – Federal	$	33,494,000		$	29,303,000
Net operating loss carryforwards – State		6,171,000			8,441,000
Net operating loss carryforwards – Foreign		2,128,000			1,876,000
Capitalized licensing fees		757,000			912,000
Stock-based compensation		2,892,000			2,447,000
Accrued compensation		349,000			307,000
Other		24,000			110,000
Totals		45,815,000			43,396,000
Less valuation allowance		(45,815,000	)		(43,396,000	)
Deferred tax assets	$	-		$	-

The Company had the following potentially utilizable net operating loss tax carryforwards:

	December 31,
	2019		2018
Federal	$	155,400,000	$	139,538,000
State	$	82,700,000	$	118,719,000
Foreign	$	7,091,000	$	6,250,000

The net operating loss tax generated before January 1, 2019 carryforwards will start to expire in 2027 for Federal purposes and have already begun to expire for state purposes. The Tax Cuts and Jobs Act of 2017 (the "Act") limits the net operating loss deduction to 80% of taxable income for losses arising in tax years beginning after December 31, 2017. However, the net operating losses now have an indefinite carryforward as opposed to the current 20-year carryforward. The foreign net operating loss tax carryforwards do not expire. Our federal and state operating loss carryforwards include windfall tax deductions from stock option exercises.

The utilization of the Company's net operating losses may be subject to a substantial limitation due to the "change of ownership provisions" under Section 382 of the Internal Revenue Code and similar state provisions. Such limitation may result in the expiration of the net operating loss carryforwards before their utilization.

The Company's foreign earnings are derived from its German subsidiary. The Company does not expect any foreign earnings to be repatriated in the U.S. in the near future.

The Company's effective tax rate varied from the statutory rate as follows:

	December 31,
	2019			2018
Statutory federal tax rate		21.0	%		21.0	%
State income tax rate (net of federal)		7.2	%		4.5	%
Effect of foreign operations		0.8	%		1.1	%
Federal deferred tax rate change		0.1	%		0.0	%
NJ NOL adjustment		6.2	%		0.0	%
Other permanent differences		(0.4	)%		(0.3	)%
Effect of valuation allowance		(11.3	)%		(26.3	)%
Effective tax rate		23.6	%		0.0	%

In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the appropriate character during the periods in which those temporary differences become deductible and the loss carryforwards are available to reduce taxable income. In making its assessment, the Company considered all sources of taxable income including carryback potential, future reversals of existing deferred tax liabilities, prudent and feasible tax planning strategies, and lastly, objectively verifiable projections of future taxable income exclusive of reversing temporary differences and carryforwards. At December 31, 2019 and 2018, the Company maintained a full valuation allowance against its net deferred tax assets. The Company will continue to assess all available evidence during future periods to evaluate the realization of its deferred tax assets.

The following table presents the changes in the deferred tax asset valuation allowance for the periods indicated:

Year Ended	Balance at Beginning of Year		Increase (Decrease) Charged (Credited) to Income Taxes (Benefit)		Increase (Decrease) Charged (Credited) to OCI			Balance at End of Year
December 31, 2019	$	43,396,000	$	2,449,000	$	(30,000	)	$	45,815,000
December 31, 2018	$	36,346,000	$	7,082,000	$	(32,000	)	$	43,396,000

Accounting for uncertainty in income taxes requires uncertain tax positions to be classified as non-current income tax liabilities unless they are expected to be paid within one year. The Company has concluded that there are no uncertain tax positions requiring recognition in its consolidated financial statements as of December 31, 2019 and 2018. The Company recognizes interest and penalties related to uncertain tax positions if any as a component of income tax expense.

The Company files income tax returns in the U.S. federal, state and foreign jurisdictions. Tax years 2014 to 2018 remain open to examination for both the U.S. federal and state jurisdictions. Tax years 2015 to 2018 remain open for Germany.

In April 2019, the Company sold a portion of its unused net operating losses ("NOL") carryforwards through the State of New Jersey's Economic Development Authority ("NJEDA") Technology Business Tax Certificate Transfer program which allowed the Company to sell $5,413,000 of its total $6,085,000 in available NOL tax benefits for the state fiscal year 2018. The Company realized net proceeds of $5,061,000 from the sale of its NOL.