Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.10.0.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
10.  INCOME TAXES
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
Tax provision (benefit)
 
 
 
 
 
 
 
 
Current
 
 
 
 
 
 
 
 
Federal
 
$
—
 
 
$
—
 
State
 
 
—
 
 
 
—
 
Total current
 
 
—
 
 
 
—
 
 
 
 
 
 
 
 
 
 
Deferred
 
 
 
 
 
 
 
 
Federal
 
 
(2,688,003
)
 
 
13,626,404
  
State
 
 
(45,138
)
 
 
1,969,262
  
Total deferred
 
 
(2,733,141
)
 
 
15,595,666
  
 
 
 
 
 
 
 
 
 
Change in valuation allowance
 
 
2,733,141
  
 
 
(15,595,666
)
Total
 
$
—
 
 
$
—
 
  
Deferred tax assets consisted of the following at December 31:
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
Deferred tax assets
 
 
 
 
 
 
 
 
Federal net operating loss
 
$
26,562,715
  
 
$
24,353,504
  
Federal research and development tax credit carryforwards
 
 
5,439,062
  
 
 
4,947,879
  
State net operating losses and tax credit carryforwards
 
 
1,589,926
  
 
 
1,589,927
  
Capitalized research and development expenses
 
 
5,959,275
  
 
 
5,772,165
  
Stock-based compensation expense
 
 
1,565,130
  
 
 
1,445,078
  
Depreciable assets
 
 
—
  
 
 
166,793
  
Other
 
 
103,189
  
 
 
121,680
  
Total deferred tax assets
 
 
41,219,297
  
 
 
38,397,026
  
 
 
 
 
 
 
 
 
 
Deferred tax liabilities
 
 
 
 
 
 
 
 
   Depreciable assets
 
 
(89,129
)
 
 
—
  
Total deferred tax liabilities
 
 
(89,129
)
 
 
—
  
 
 
 
 
 
 
 
 
 
Net deferred tax assets
 
 
41,130,168
  
 
 
38,397,026
  
Less– valuation allowance
 
 
(41,130,168
)
 
 
(38,397,026
)
Total deferred tax assets
 
$
—
  
 
$
—
  
  
A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations is as follows:
 
 
 
Year ended December 31,
 
 
 
2018
 
 
2017
 
Income tax benefit using U.S. federal statutory rate
 
 
(21.00
)%
 
 
34.00
 %
State income taxes
 
 
(0.27
)%
 
 
(9.58
)%
Permanent items
 
 
2.56
 %
 
 
(2.55
)%
Federal tax credits
 
 
(3.44
)%
 
 
8.43
 %
Change in valuation allowance
 
 
20.65
 %
 
 
115
 %
Federal rate change
 
 
—
 %
 
 
(143.50
)%
Other
 
 
1.50
 %
 
 
(1.80
)%
Total
 
 
0.00
 %
 
 
0.00
 %
 
As of December 31, 2018, the Company had federal and state net operating loss carryforwards (“NOLs”) of approximately $126,489,000 and $15,862,000
respectively. 
Federal net operating loss generated as of December 31, 2017 will expire in 2019 through 2037, net operating loss generated during 2018 and later will be carried forward indefinitely until utilized. State net operating loss will expire
 in 2028 through 2031. In addition, the Company has federal and state research and development and orphan drug credits of approximately $5,403,000 and $805,000, respectively, which expire in 2019 through 2038 and in 2024 through 2033, respectively.  The amount of NOLs and tax credit carryforwards which may be utilized annually in future periods will be limited pursuant to Section 382 of the Internal Revenue Code as a result of substantial changes in the Company’s ownership that have occurred or that may occur in the future.  The Company has not quantified the amount of such limitations.
 
Because of the Company’s continuing losses and uncertainty associated with the utilization of the deferred tax assets in the future, management has provided a full allowance against the net deferred tax asset.
 
The Company did not have unrecognized tax benefits or accrued interest and penalties at any time during the years ended December 31, 2018 or 2017 and does not anticipate having unrecognized tax benefits over the next twelve months.  The Company is subject to audit by the IRS and state taxing authorities for tax periods commencing January 1, 2015. Additionally, the Company may be subject to examination by the IRS for years beginning prior to January 1, 2015 as a result of its NOLs. However, any adjustment related to these periods would be limited to the amount of the NOL generated in the year(s) under examination.
  
On December 22, 2017 The Tax Cuts and Jobs Act (the “Act”) was enacted. The Act significantly revised the U.S. corporate income tax law by lowering the corporate Federal income tax rate from 35% to 21%. As of December 31, 2017, the Company has assessed the effects of the corporate rate reduction on its existing deferred tax balances which resulted in the valuation allowance equal to the effect of the rate reduction on the ending deferred tax asset. In addition to the rate reduction, the Act requires companies with foreign subsidiaries to pay
a one-time transition tax on earnings that were previously tax deferred, and also imposes a current taxation on income earned during the year. As of December 31, 2018, the Company does not maintain any foreign subsidiaries and does not have previously deferred foreign earnings subject to the transition tax.