Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

12. INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (“the Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a United States corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017.

The components of the provision for income tax expense are as follows for the years ended:

	December 31,
	2018		2017
Current taxes
Federal	$	—	$	—
State		—		—
Current taxes		—		—
Change in deferred taxes		2,520		—
Change in valuation allowance		—		—
Provision for income tax expense	$	2,520	$	—

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2018 and 2017:

	December 31,
	2018		2017
Deferred tax assets:
Equity based compensation	$	154,400	$	394,504
Allowance for doubtful accounts		2,300		17,000
Net operating loss carryforward		1,161,700		625,893
Allowance for slow moving inventory		25,300		2,331
Total deferred tax assets		1,343,700		1,039,728
Valuation allowance		(1,343,700		(1,037,208	)
Deferred tax assets net of valuation allowance		—		2,520
Less deferred tax assets – non-current, net of valuation allowance		—		2,520
Deferred tax assets – current, net of valuation allowance	$	—	$	—

The effective tax rate used for calculation of the deferred taxes as of December 31, 2018 was 25.35%. The Company has established a valuation allowance against deferred tax assets of $1,343,700, due to the uncertainty regarding realization, comprised primarily of a 100% reserve against the net operating carryforward, 100% reserve against the allowance for doubtful accounts, and 100% reserve against the deferred tax assets attributable to the equity based compensation.

The effective tax rate used for calculation of the deferred taxes as of December 31, 2017 was 0%. The Company has established a valuation allowance against deferred tax assets of $1,037,208 or 99.8%, due to the uncertainty regarding realization, comprised primarily of a 100% reserve against the net operating carryforward, 100% reserve against the allowance for doubtful accounts and slow moving inventory, and 100% reserve against the deferred tax assets attributable to the equity based compensation.

The significant differences between the statutory tax rate and the effective tax rates for the Company for the years ended are as follows:

	December 31,
	2018			2017
Statutory tax rate		21.00	%		21.00	%
State tax, net of Federal benefits		4.35	%		3.63	%
Change in valuation allowance		(25.35	)%		(24.63	)%
Effective tax rate		—	%		—	%