Note 6 – Income Taxes

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

	For The Years Ended
	December 31,
	2017		2016
Federal:
Current	$	-	$	-
Deferred		235,473		1,287,931
State and local:				-
Current		-		-
Deferred		80,301		151,521
		315,774		1,439,452
Change in valuation allowance		(315,774)		(1,439,452)
Income tax (provision) benefit	$	-	$	-

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

	For The Years Ended
	December 31,
	2017			2016
Tax benefit at federal statutory rate		34.0	%		34.0	%
State income taxes, net of federal benefit		4.0	%		4.0	%
Incremental research and development credits		6.3	%		2.7	%
Prior period adjustments and other		(8.1)	%		0.0	%
Effect of tax rate changes		(30.0)	%		0.0	%
Change in valuation allowance		(6.2)	%		(40.7)	%
Effective income tax rate		0.0	%		0.0	%

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are presented below:

	December 31,
	2017		2016
Deferred Tax Assets:
Net operating loss carryforwards	$	2,588,641	$	2,742,397
Stock-based compensation		347,977		333,066
Research & development tax credits		526,134		201,840
Intangible assets		364,508		234,183
Gross deferred tax assets		3,827,260		3,511,486

Valuation allowance		(3,827,260)		(3,511,486)

Deferred tax assets, net of valuation allowance	$	-	$	-

Changes in valuation allowance	$	(315,774)	$	(1,439,452)

The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the Company’s history of losses since inception, management believes that it is more likely than not that future benefits of deferred tax assets will not be realized.

At December 31, 2017 and 2016, the Company estimates that it has approximately $11,000,000 and $7,200,000, respectively, of federal net operating losses that may be available to offset future taxable income. The net operating loss carry forwards, if not utilized, will expire from 2034 to 2037 for federal purposes. At December 31, 2017, the Company estimates that it has approximately $2,000,000 of New York State net operating losses that may be available to offset future taxable income. In accordance with Section 382 of the Internal Revenue Code, the usage of the Company’s net operating loss carry forwards could become subject to annual limitations if there are greater than 50% ownership changes.

The Company files income tax returns in the U.S. federal jurisdiction, the State of New York and the state of Florida (where the Company filed its final return in 2015), which remain subject to examination by the various taxing authorities beginning with the tax year ended December 31, 2014.

The Tax Cuts and Jobs Act (the "Act") was enacted in December 2017. Among other things, the primary provision of Tax Reform impacting the Company is the reduction to the U.S. corporate income tax rate from 35% to 21%. The change in tax law required the Company to remeasure existing net deferred tax assets using the lower rate in the period of enactment resulting in an income tax expense of approximately $1.5 million which is fully offset by the corresponding tax benefit of $1.5 million from the reduction in the valuation allowance in the year ended December 31, 2017. There were no specific impacts of Tax Reform that could not be reasonably estimated which the Company accounted for under the prior tax law. However, further analysis of the estimates and further guidance on the application of the law could result in additional revisions during the allowable one-year measurement period, as outlined in Staff Accounting Bulletin No. 118.