Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

5. Income Taxes

The Company’s provision for income taxes is comprised of the following:

	December 31,
	2018		2017
Current
Federal	$	-	$	-
State and local		3,001		228,972
Total Current		3,001		228,972
Deferred
Federal		-		-
State and local		-		-
Change in Valuation Allowance		-		-
Total Deferred		-		-
Total Provision (Benefit)	$	3,001	$	228,972

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:

	December 31,
	2018			2017
Deferred Tax Assets:
Net operating losses	$	4,529,410		$	4,327,027
Share-based compensation		1,061,421			868,222
Amortization of Intangible Assets		767,591			432,335
Tax Credits		62,969			62,969
Other		10,528			12,755
Subtotal		6,431,919			5,703,308
Less Valuation Allowance:		(6,339,578	)		(5,649,582	)
Total Deferred Tax Assets		92,341			53,726
Deferred Tax Liabilities:
Intangibles		-			-
Property and equipment		(92,341	)		(53,726	)
Other		-			-
Total Deferred Tax Liabilities		(92,341	)		(53,726	)
Net Deferred Tax Assets	$	-		$	-

In assessing the Company’s ability to recover its deferred tax assets, the Company evaluated whether it is more likely than not that some portion or the entire deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Based on these factors including cumulative losses in recent years, the Company determined that its deferred tax assets are not realizable on a more-likely-than-not basis and has recorded a valuation allowance against its net deferred tax assets. The Company’s valuation allowance increased by $689,996 during 2018. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred income tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly.

As of December 31, 2018, the Company has U.S. federal net operating loss carryforwards of approximately $20.2 million, which may be subject to annual limitations under Section 382 of the Internal Revenue Code. Approximately, $19.1 million of U.S. federal net operating loss carryforwards expire in 2028 to 2037, if not utilized. These net operating losses are available to offset 100% of future taxable income. The remaining $1.1 million of U.S. federal net operating loss may be carried forward indefinitely but are only available to offset 80% of future taxable income.

The Company’s effective tax rate differs from the U.S. federal statutory income tax rate of 21% for 2018 and 34% for 2017 as follows:

	2018			2017
Income tax expense (benefit) at federal statutory rate		21.0	%		34.0	%
State and local taxes		(2.4	)%		(2.6	)%
Federal tax reform		0.0	%		(55.0	)%
Valuation allowance		(18.2	)%		25.3	%
Payable true-up		0.0	%		(3.8	)%
Other		(0.5	)%		(1.9	)%
Effective tax rate		(0.1	)%		(4.0	)%

The U.S. Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and introduces significant changes to U.S. income tax law. Among other things, the Tax Act (1) reduces the US statutory corporate income tax rate from 34% to 21% effective January 1, 2018 (2) eliminates the corporate alternative minimum tax (3) eliminates the Section 199 deduction (4) changes rules related to uses and limitations of net operating loss carryforwards beginning after December 31, 2017. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted.

Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to provide guidance on accounting for the tax effects of the Tax Act. The purpose of SAB 118 was to address any uncertainty or diversity of view in applying ASC Topic 740, Income Taxes in the reporting period in which the Tax Act was enacted. Additionally, SAB 118 allows for a measurement period to finalize the impacts of the Tax Act not to extend beyond one year from the date of enactment. For the year ended December 31, 2017, the Company has recorded a provisional decrease in its deferred tax assets and liabilities of $3,116,794 with an offsetting adjustment to our valuation allowance. During 2018, the Company finalized the accounting for the tax effects of the Tax Act with no material changes to the provisional estimate recorded in prior periods.

The Company applies the applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2018 the Company has no uncertain tax positions. There are no uncertain tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months from December 31, 2018.

The Company files a federal income tax return and income tax returns in various state tax jurisdictions. The open tax years for the federal income tax return is 2015 through 2018. The state income tax returns have varying statutes of limitations. The open tax years relating to any of the Company’s federal and state net operating losses begin in 2009.