Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes.

The Company provides for income taxes under ASC 740. Under ASC 740, the liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company has not recorded a current or deferred income tax expense or benefit since its inception.

The Company’s loss before income taxes was $11,726,818 and $2,660,677 for the years ended December 31, 2015 and 2014, respectively, and was generated entirely in the United States.

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets are comprised of the following:

	Year Ended December 31, 2015			Year Ended December 31, 2014
Net operating loss carryforward	$	4,316,110		$	1,330,660
Research and development credit carryforward		198,490			—
Other temporary differences		62,928			—
Gross deferred tax assets		4,577,528			1,330,660
Deferred tax valuation allowance		(4,577,528	)		(1,330,660	)
	$	—		$	—

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses since inception, the Company has concluded that it is more likely than not that the benefit of its deferred tax assets will not be realized. Accordingly, the Company has provided a full valuation allowance for deferred tax assets as of December 31, 2015 and 2014. The valuation allowance increased by $3,246,868 and $1,064,660 for the years ended December 31, 2015 and 2014, respectively, due primarily to the generation of net operating losses during the periods.

A reconciliation of income tax benefit computed at the statutory federal income tax rate to income taxes as reflected in the financial statements is as follows:

	December 31, 2015		December 31, 2014
U.S. statutory income tax rate	34.0	%	35.0	%
State income taxes, net of federal benefit	7.9		5.0
Permanent differences	(12.8	)	—
Rate change and provision to return true-up	8.0		—
R&D credit carryforwards	1.8		—
Valuation allowance	(38.9	)	(40.0	)
Effective tax rate	—	%	—	%

As of December 31, 2015 and 2014, the Company had U.S. federal net operating loss carryforwards of $10,005,274 and $3,312,651, respectively, which may be available to offset future income tax liabilities and will begin to expire at various dates starting in 2033. As of December 31, 2015 and 2014, the Company also had U.S. state net operating loss carryforwards of $17,467,895 and $0, respectively, which may be available to offset future income tax liabilities and will begin to expire at various dates starting in 2033.

Under the provisions of the Internal Revenue Code, the NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several financing transactions since its inception which may have resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code, or could result in a change in control in the future.

The Company files income tax returns in the United States, and various state jurisdictions. The federal and state income tax returns are generally subject to tax examinations for the years ended December 31, 2015 and 2014 and for the period from July 26, 2013 through December 31, 2013.  To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service or state tax authorities to the extent utilized in a future period.