Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

13. Income Taxes

2017 U.S. Tax Reform

The JOBS Act significantly revised the U.S. Corporate income tax by lowering the corporate federal income tax rate from 35% to 21% effective January 1, 2018.

The significant components of the Company’s net deferred tax assets are as follows for the years ended December 31:

	2019			2018
Deferred tax assets:
Net operating loss carryforwards	$	12,204,312		$	12,291,278
Provision for reserves		134,908			129,745
Compensatory stock options and warrants		193,066			179,275
Other		1,252			1,252
Total deferred tax assets		12,533,538			12,601,550
Valuation allowance		(12,533,538	)		(12,601,550	)
Net deferred tax assets	$	—		$	—

FASB ASC 740, Income Taxes, requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, management has determined that a full valuation allowance of $12,533,538 and $12,601,550 against its net deferred taxes is necessary as of December 31, 2019 and December 31, 2018, respectively. The change in valuation allowance for the years ended December 31, 2019 and 2018 is $(68,012) and $54,454, respectively.

At December 31, 2019 and December 31, 2018, respectively, the Company had approximately $48,152,000 and $48,495,000, respectively, of U.S. net operating loss carryforwards remaining.

As a result of certain ownership changes, the Company may be subject to an annual limitation on the utilization of its U.S. net operating loss carryforwards pursuant to Section 382 of the Internal Revenue Code. A study to determine the effect, if any, of this change, has not been undertaken.

Tax returns for the years ended December 31, 2019, 2018, 2017, 2016, and 2015 are subject to examination by the Internal Revenue Service.

A reconciliation of the Company’s income taxes to amounts calculated at the federal statutory rate is as follows for the years ended December 31:

	2019			2018
Federal statutory taxes		(21.00	)%		(21.00	)%
State income taxes, net of federal tax benefit		(4.35	)%		(4.35	)%
Nondeductible items		0.00			0.00
Change in net loss carryforwards		29.35			—
Change in valuation allowance		(4.00	)%		25.35	%
		—	%		—	%