Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  

A reconciliation of income taxes at the U.S. Federal statutory rate to the benefit for income taxes is as follows:


    Year Ended December 31,
    2016   2015
Benefit at U.S. Federal statutory rate   $ (6,635,151 )   $ (6,109,776 )
State taxes - deferred     (266,312 )     (124,874 )
Increase in valuation allowance, inclusive of true-ups     5,755,413       6,021,614  
Research and development credits     (322,499 )     (389,355 )
Other     1,468,549       602,391  
Benefit for income taxes   $ —       $ —    


A summary of the Company’s deferred tax assets is as follows:


    December 31,
    2016   2015
Federal and state net operating loss carryforwards   $ 30,843,479     $ 25,834,860  
Federal and state research credits     4,099,249       4,353,534  
Transaction costs     652,695       —    
Deferred revenue     972,345       1,020,872  
Accrued expenses and other     747,586       350,675  
Total gross deferred tax assets     37,315,354       31,559,941  
Less: valuation allowance for deferred tax assets     (37,315,354 )     (31,559,941 )
Net deferred tax assets   $ —       $ —    


We have incurred substantial losses during our history. As of December 31, 2016, we had Federal and state Net Operating Losses, (“NOLs”) of $87.8 million and $75.2 million, respectively, as well as Federal research and development tax credit carryforwards of approximately $4.1 million. The $87.8 million and $75.2 million in Federal and state NOLs, respectively, will begin to expire at various dates beginning in 2027, if not limited by triggering events prior to such time. Under the provisions of the Internal Revenue Code, changes in our ownership, in certain circumstances, will limit the amount of Federal NOLs that can be utilized annually in the future to offset taxable income. In particular, Section 382 of the Internal Revenue Code imposes limitations on a company’s ability to use NOLs upon certain changes in such ownership. If we are limited in our ability to use our NOLs in future years in which we have taxable income, we will pay more taxes than if we were able to utilize our NOLs fully. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership that we cannot predict or control that could result in further limitations being placed on our ability to utilize our Federal NOLs.


A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. When determining the amount of net deferred tax assets that are more likely than not to be realized, the Company assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, expected future earnings, carry-back and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income exclusive of reversing taxable temporary differences to outweigh objective negative evidence of recent financial reporting losses. Based on these criteria and the relative weighting of both the positive and negative evidence available, management continues to maintain a full valuation allowance against its net deferred tax assets.