12.

Income Taxes

Deferred tax assets and liabilities are determined based on the differences between the financial statement carrying amounts and tax bases of assets and liabilities using enacted tax rates in effect for years in which differences are expected to reverse.

Significant components of the Company's deferred tax assets for federal income taxes consisted of the following:

Deferred tax assets	December 31, 2018			December 31, 2017
Net operating loss carryforwards	$	5,875,074		$	5,310,628
Stock option compensation		2,456,410			2,141,973
Orphan Drug credits		2,847,803			2,537,039
Capitalized start-up costs and other		7,349,092			5,247,468
Valuation allowance		(18,091,090	)		(15,237,108	)
Net deferred tax asset	$	437,289

Deferred tax liabilities
Intangible assets		(2,223,678	)		(2,223,678	)
Net deferred tax liability	$	(1,786,389	)	$	(2,223,678	)

The Company does

not

have unrecognized tax benefits as of

December

31,

2018

December 31, 2017.

The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

The Company had net operating loss carryforwards (“NOL”) for federal and state income tax purposes at

December

31,

2018

of approximately:

Combined NOL Carryforwards:	December 31, 2018
Federal	$	22,819,972
State		22,845,568

The net operating loss carryforwards generated prior to

2017

begin expiring in

2034

for both federal and state income tax purposes. Those generated in

2018

and into the future now have an indefinite life. In

January 2016,

the Company increased the number of shares outstanding resulting in a change of ownership, under the provisions of Internal Revenue Code section

382

and similar state provisions. Stock issuances in

2018

and

2017

might have also resulted in changes of ownership. These provisions limit the Company's ability to utilize these net operating loss carryforwards to offset future income. The amounts above reflect the amount of NOLs that the Company expects to be able to utilize as a result of the limitation. Excluding the deferred tax asset associated with the net operating loss with unlimited carryforward, the Company recorded a valuation allowance for the remaining deferred tax assets as of

December 31, 2018,

because of the uncertainty of their realization.

A reconciliation of income tax benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:

Rate reconciliation:	December 31, 2018			December 31, 2017
Federal tax benefit at statutory rate		(21.0	)%		(34.0	)%
State tax, net of Federal benefit		(2.9	)%		(16.3	)%
Change in fair value of warrant		—	%		(126.1	)%
Change in tax rate		—	%		205.5	%
Goodwill impairment		7.7	%		—	%
Orphan drug credit		(1.3	)%		(36.0	)%
Change in valuation allowance		15.2	%		(38.8	)%
Stock compensation		—	%		1.2	%
Other		—	%		1.0	%
Total provision		(2.3	)%		(43.5	)%

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company’s

2015

2017

tax years remain open and subject to examination; carryforward amounts from the

2014

year remain subject to adjustment.

December 22, 2017

the President of the United States signed into law the Tax Cuts and Jobs Act (“The

2017

Tax Act”), which resulted in significant changes from previous tax law. The

2017

Tax Act required the Company to revalue its deferred tax assets and liabilities to the new rate of

21%.

As a result of the change, the Company recorded a tax benefit of

$1.1

million for the year ended

December 31, 2017.

The

2017

Tax Act also changed the net operating loss carryforwards’ period such that all net operating losses generated in

2018

and into the future now have an indefinite life. As a result of the change in net operating loss carryforward period, during the year ended

December 31, 2018,

the Company recognized an income tax benefit of

$0.4

million to reflect the adjustment allowed by the

2017

Tax Act to utilize indefinite deferred tax liabilities as a source of income against indefinite lived portions of the Company’s deferred tax assets.