INCOME TAXES

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 4 – INCOME TAXES

The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2019 and 2018 is as follows (in thousands):

	Year Ended December 31
US	2019			2018
Income before income taxes	$	(2,508	)	$	(2,932	)
Taxes under statutory US tax rates		(527	)		(616	)
Increase (decrease) in taxes resulting from:
Increase (decrease) in valuation allowance		529			(92	)
All other		72			857
State taxes		(74	)		(149	)
Income tax expense	$	-		$	-

The increase in the Company's net increase in the valuation allowance was caused by continued net operating losses from ongoing operations.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities consist of the following (in thousands):

	December 31,
	2019			2018
US
Net operating loss	$	8,545		$	8,316
Share based compensation		725			447
Reserves and accruals		2			(21	)
Gross deferred tax assets		9,272			8,742
Less valuation allowance		(9,272	)		(8,742	)
Total deferred tax assets		-			-
Deferred tax liabilities:
Total deferred tax liabilities		-			-
Net deferred tax assets / (liabilities)	$	-		$	-

As of December 31, 2019, the Company had federal and state net operating loss carry forwards of $37.8 million and $11.4 million, respectively that may be offset against future taxable income, subject to limitation under IRC Section 382, which begin to expire in 2020.  No tax benefit has been reported in the December 31, 2019 or 2018 financial statements due to the uncertainty surrounding the realizability of the benefit, based on a more likely than not criteria and in consideration of available positive and negative evidence. 

Utilization of the net operating losses (NOL) carryforwards may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code (IRC) of 1986, as amended (the Code), as well as similar state provisions. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders. At the time of closing the books, the Company had not yet completed a study to determine the extent of the limitation.

The Company applied the "more-likely-than-not" recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2019 and December 31, 2018, respectively.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest and penalties on the balance sheets and has not recognized interest and/or penalties in the statements of operations and comprehensive loss for the years ended December 31, 2019 and 2018.

The Company is subject to taxation in the United States and various state jurisdictions. The Company’s tax years from inception are subject to examination by the United States and state taxing authorities due to the carryforward of unutilized NOLs.

On December 22, 2017, the United States enacted significant changes to the U.S. tax law following the passage and signing of H.R.1, “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018” (the “Tax Act”) (previously known as “The Tax Cuts and Jobs Act”).  The Tax Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the corporate tax rate from 35% to 21%.  The Tax Act reduced the U.S. corporate income tax rate reduction to 21% becomes effective January 1, 2018. The Company re-measured its deferred tax assets and liabilities as of December 31, 2017, applying the reduced corporate income tax rate and recorded a provisional decrease to the deferred tax assets and liabilities of $6.2 million, with a corresponding adjustment to the valuation allowance. 

There are no taxes payable as of December 31, 2019 or December 31, 2018.