Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

The domestic and foreign components of loss before income taxes from operations for the years ended December 31, 2018 and 2017 are as follows:

	For the Years Ended December 31
	2018			2017
Domestic		(7,954,841	)		(13,395,048	)
Foreign		(198,214	)		(122,768	)
		(8,153,055	)		(13,517,816	)

The income tax provision (benefit) consists of the following:

	Year ended December 31
	2018			2017
Federal:
Current	$	-		$	-
Deferred		(1,385,438	)		13,026,739
State and local:
Current		-			-
Deferred		(338,773	)		1,724,127
		(1,724,211	)		14,750,866
Change in valuation allowance		1,724,211			(14,750,866	)
Income tax provision (benefit)	$	-		$	-

The reconciliations between the statutory federal income tax rate and the Company’s effective tax rate is as follows:

	Year Ended December 31
	2018			2017
Tax benefit at federal statutory rate		(21.0	)%		(34.0	)%
State income taxes, net of federal benefit		(5.1	)%		(4.5	)%
Permanent differences		(1.7	)%		(1.9	)%
Effect of change in federal income tax rates on deferred taxes		0.0	%		147.4	%
Change in valuation allowance		20.8	%		(109.0	)%
Prior year true-up		5.8	%		0.0	%
Miscellaneous		1.3	%		2.0	%
Effective income tax rate		0.0	%		0.0	%

The components of the Company’s deferred income taxes are summarized below:

	December 31
	2018			2017
Deferred Tax Assets:
Net operating loss carryforwards	$	41,114,624		$	40,156,864
Stock-based compensation		2,207,465			2,207,465
Research and development credit carryovers		2,791,710			2,591,539
Contribution carryovers		10,062			10,715
Accrued liabilities		490,467			-
Gross deferred tax assets		46,614,328			44,966,584
Deferred Tax Liabilities:
Intangible assets		(235,013	)		(410,410	)
Prepaid expenses		(90,881	)		-
Other		(29,545	)		(21,496	)
Gross deferred tax liabilities		(355,439	)		(431,906	)
Valuation allowance		(46,258,889	)		(44,534,678	)
Deferred tax asset, net of valuation allowance	$	-		$	-
Change in valuation allowance	$	(1,724,211	)	$	14,750,866

Under ASC 740, Income Taxes, the enactment of the Tax Act requires companies to recognize the effects of changes in tax laws and rates on deferred tax assets and liabilities and the retroactive effects of changes in tax laws in the period in which the new legislation is enacted. In 2017, the Company’s gross deferred tax assets were revalued using the new enacted rate of 21% effective January 1, 2018 with a corresponding offset to the valuation allowance and any potential other taxes arising due to the Tax Act will result in reductions to its net operating loss carryforward and valuation allowance. Deferred tax assets of approximately $60,148,509 were revalued to approximately $44,966,584 with a corresponding decrease to the Company’s valuation allowance. There was no further change to the Company’s assertion on maintaining a full valuation allowance against its U.S. deferred tax assets.

A valuation allowance against deferred tax assets is required if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets may not be realized. The Company is in the early stages of development and realization of the deferred tax assets is not considered more likely than not. As a result, the Company has recorded a full valuation allowance for the net deferred tax asset.

Since inception of the Company on January 17, 2002, the Company has generated tax net operating losses of approximately $158 million. Under the Tax Cuts and Jobs Act, net operating loss incurred after December 31, 2017 may be carried forward indefinitely. The tax loss carry-forwards of the Company may be subject to limitation by Section 382 of the Internal Revenue Code with respect to the amount utilizable each year. This limitation reduces the Company’s ability to utilize net operating loss carry-forwards.

The Company has determined that there are no uncertain tax positions as of December 31, 2018 or 2017

The Company files income tax returns in the U.S. federal jurisdiction and the state of Tennessee. The Company intends to permanently reinvest earnings in its foreign subsidiary.

To date, the Company’s operations conducted by its Australian subsidiary consist primarily of research and development activities. As of December 31, 2018, there were no accumulated earnings and profits in the Company’s foreign subsidiary. At current tax rates, no additional Federal income taxes (net of available tax credits) would be payable if such earnings were to be repatriated.