Entity information:
NOTE
10.
INCOME TAXES
Income tax (expense) benefit for the years ended
December 31, 2017
and
2016
consisted of the following:
 
   
 
Year Ended
December 31, 2017
    
Year Ended
December 31, 2016
  
Current:
                
Federal
   $
-
     $
-
  
State
    
-
      
-
  
Foreign
    
-
      
-
  
Deferred:
                
Federal
    
12,770,584
      
1,551,284
  
State
    
-
      
-
  
Foreign
    
-
      
-
  
Change in valuation allowance
    
(13,690,584
 )    
(1,551,284
 )
                 
Total Benefit for Income Taxes
   $
(920,000
 )   $
-
  
 
The income tax benefit of
$920,000
for the year ended
December 31, 2017
relates to the basis difference in the acquired intangible assets acquired from Dipexium.
 
Significant components of
 the Company's deferred tax assets and liabilities consisted of the following at
December 31, 2017
and 
2016:
 
   
December 31,
2017
    
December 31,
2016
  
Deferred tax assets:
                
Stock-based compensation
   $
3,085,484
     $
922,463
  
Tax credit carryforwards
    
3,616,246
      
-
  
Net operating loss carryforwards
    
8,715,591
      
833,458
  
Intangible assets
    
372,944
      
604,416
  
Other
    
350,690
      
81,111
  
Total deferred tax assets
    
16,140,955
      
2,441,448
  
                 
Deferred tax liabilities:
                
Property and equipment
    
8,922
      
-
  
Total deferred tax liabilities
    
8,922
      
-
  
                 
Net deferred tax assets
    
16,132,033
      
2,441,448
  
Less valuation allowance
    
(16,132,033
 )    
(2,441,448
 )
Total deferred tax assets (liabilities)
   $
-
      
-
  
 
 
The following table presents reconciles the U.S. federal statutory income tax rate
in effect for
2017
and the Company's effective tax rate:
 
   
Year Ended
December 31,
2017
    
Year Ended
December 31,
2016
  
U.S. federal statutory income tax
    
(34.0
 %)    
(34.0
 %)
State and local income tax, net of benefits
    
-
      
-
  
Fair value of derivatives
    
(1.40
 %)    
-
  
Release of valuation allowance in connection with merger
    
5.99
 %    
-
  
Tax rate changes and other
    
37.85
 %    
0.69
 %
Valuation allowance for deferred income tax assets
    
(2.44
 %)    
33.31
 %
                 
Effective income tax rate
    
(6.00
 %)    
0.0
 %
 
 
The
reduction in the federal tax rate to
21%
under the Tax Act, effective on
January 1, 2018,
resulted in a reduction in the value of the Company’s net deferred tax assets and related valuation allowance of approximately
$5.9
million. The Company had net operating loss carry-forwards of approximately
$41.5
million as of
December 31, 2017,
that
may
be offset against future taxable income. The carry-forwards will begin to expire in
2035.
Use of these carry-forwards
may
be subject to annual limitations based upon previous significant changes in stock ownership. The Company does
not
believe that it has any uncertain income tax positions.