Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 11. Income Taxes

As of December 31, 2020, the Company has U.S. federal net operating loss (“NOL”) carryforwards of approximately $249 million. NOLs amounting to $60 million generated before the 2018 tax year will start expiring beginning 2032, and the NOL of approximately $189 million generated in 2018 and later have an indefinite carryforward period. The NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders, 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 components of the Company’s deferred tax assets and deferred tax liabilities are as follows:

	December 31, 2020			December 31, 2019
Deferred tax assets:
Net federal operating loss carryforward	$	52,329,877		$	32,299,085
Net foreign operating loss carryforward		86,829			59,557
Net state operating loss carryforward		32,410,604			20,000,317
Non-cash compensation		7,329,228			3,485,519
Research and development credits		13,028,222			10,366,683
Interest Expense		1,765,452			985,431
Charitable Contribution		5,408			5,408
Fixed Assets		7,883			11,401
Lease Liability		612,973		—
Accrued expenses		968,709			1,200,754
Deferred tax asset, excluding valuation allowance		108,545,185			68,414,155
Deferred tax liabilities:
Deferred finance costs	—				(121,875	)
Lease Asset		(591,607	)	—
Deferred tax liability, excluding valuation allowance		(591,607	)		(121,875	)
Less valuation allowance		(107,953,578	)		(68,292,280	)
Net deferred tax assets	$	—		$	—

A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes the Company’s historical operating losses and forecast of future losses, the Company provided a full valuation allowance against the deferred tax assets resulting from the tax loss and credits carried forward. Valuation allowance increased $39.7 million, $27.0 million, and $12.5 million, in 2020, 2019, and 2018, respectively, as a result of the increase of the deferred tax assets.

There was no income tax expense (benefit) recorded by the Company due to its net loss tax position and full valuation allowance during the years ended December 31, 2020, 2019, and 2018. A reconciliation of income tax expense (benefit) at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements is as follows:

	December 31, 2020			December 31, 2019			December 31, 2018
U.S. federal statutory income tax rate		21.0	%		21.0	%		21.0	%
State taxes, net of federal benefit	13.7				13.5			13.1
Stock based compensation - Excess tax benefit	1.8				1.2			1.1
Other permanent differences		(0.6	)		(0.1	)		(1.3	)
Tax credit	2.5				4.2			6.3
Change in valuation allowance		(38.4	)		(39.8	)		(40.2	)
Effective tax rate		—	%		—	%		—	%

The Company is not currently under examination at the federal or state levels and as of the date of the consolidated financial statements, there were no known assessments. The Company’s U.S. federal and state net operating losses have occurred since its inception in 2012 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, including, permitting net operating losses (“NOLs”), carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act provides other reliefs and stimulus measures. We have evaluated the impact of the CARES Act, however, at present we do not expect that any provision of the CARES Act would result in a material cash benefit to us or have a material impact on our financial statements or internal controls over financial reporting.