4. INCOME TAXES

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

4. INCOME TAXES

There is no material income tax expense or benefit recorded for the years ended December 31, 2018 or 2017 due to the Company's net losses and related deferred tax asset full valuation allowance.

On December 22, 2017, the Tax Cuts and Jobs Act (2017 Tax Act) was enacted. The 2017 Tax Act includes a number of changes to existing U.S. tax laws that impact the Company, most notably a reduction of the U.S. corporate tax rate from 34% to 21%, for tax years beginning after December 31, 2017. The 2017 Tax Act also provides for the implementation of a territorial tax system, a one-time transition tax on certain foreign earnings, the acceleration of depreciation for certain assets placed into service after September 27, 2017 and other prospective changes beginning in 2018, including repeal of the domestic manufacturing deduction, acceleration of tax revenue recognition, capitalization of research and development expenditures, additional limitations on executive compensation and limitations on the deductibility of interest.

Income tax expense (benefit) for the years ended December 31, 2018 and 2017 differed from the amounts computed by applying the U.S. federal income tax rates of 21 percent and 34 percent, respectively, to the pretax income (loss) for the following reasons:

	2018			2017
Income tax expense (benefit) at U.S. federal statutory rates	$	16,000		$	(85,000	)
Impact of 2017 Tax Act		–			377,000
Foreign rate change impacts		70,000			(163,000	)
Foreign rate differential		–			(7,000	)
Change in valuation allowance		(88,000	)		(101,000	)
Other		2,000			(21,000	)
	$	–		$	–

The Company has a deferred tax asset and an equal amount of valuation allowance of approximately $2,020,000 and $2,107,000 at December 31, 2018 and 2017, respectively, relating primarily to tax net operating loss carryforwards approximating $1,900,000, as discussed below, and temporary differences related to the recognition of accrued licensing fees approximating $120,000.

As of December 31, 2018, the Company had tax net operating loss carryforwards ("NOLs") of approximately $2,382,000 and $5,584,000 available to offset future taxable Federal and foreign income, respectively. The Federal NOL begins to expire in 2025 over varying years. The foreign net operating loss relates to Germany and does not have an expiration date.

In the event the Company were to experience a greater than 50% change in ownership, as defined in Section 382 of the Internal Revenue Code, the utilization of the Company's Federal tax NOLs could be restricted.