Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Income Taxes

11. INCOME TAXES

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

	December 31,
	2019			2018
Current taxes
Federal	$	—		$	—
State		—			—
Current taxes		—			—
Change in deferred taxes		239,300			306,492
Change in valuation allowance		(239,300	)		(303,972	)
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, 2019 and 2018:

	December 31,
	2019			2018
Deferred tax assets:
Equity based compensation	$	154,400		$	154,400
Allowance for doubtful accounts		4,500			2,300
Net operating loss carryforward		1,390,700			1,161,700
Reserves for slow moving inventory		33,400			25,300
Total deferred tax assets		1,583,000			1,343,700
Valuation allowance		(1,583,000	)		(1,343,700	)
Deferred tax assets net of valuation allowance		—			—
Less deferred tax assets – non-current, net of valuation allowance		—			—
Deferred tax assets – current, net of valuation allowance	$	—		$	—

The effective tax rate used for calculation of the deferred taxes as of December 31, 2019 was 25.35%. The Company has established a valuation allowance against deferred tax assets of $1,583,000, 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, 100% reserve against the reserves for slow moving inventory, and 100% reserve against the deferred tax assets attributable to the equity based compensation. The change in valuation allowance was an increase of $239,300. The Company has approximately $4,758,000 of net loss carryforward that expire through 2037 and $729,000 that carryforward indefinitely, but is limited to 80% of taxable income in any one year.

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 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, 100% reserve against the reserves for slow moving inventory and 100% reserve against the deferred tax assets attributable to the equity based compensation. The change in valuation allowance was an increase of $306,500.

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,
	2019			2018
Statutory tax rate		(21.00	)%		(21.00	)%
State tax, net of Federal benefits		(4.35	)%		(4.35	)%
Permanent differences		8.51	%		1.59	%
Change in valuation allowance		16.84	%		23.57	%
Effective tax rate		—	%		0.19	%