9. Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

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

	Year Ended December 31,
	2017		2016 (As Restated)		2015 (As Restated)
Current:
Federal	$	–	$	–	$	–
State		86,787		37,070		14,875
Foreign		10,447		5,458		6,691
		97,234		42,528		21,566
Deferred:
Federal		–		–		77,428
State		–		–		4,075
		–		–		81,503
Total provision (benefit) for income taxes	$	97,234	$	42,528	$	103,069

The Company is subject to United States federal and state income taxes at an approximate rate of 38.25%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:

	Year Ended December 31,
	2017			2016 (As Restated)			2015 (As Restated)
Statutory tax rate		38.25	%		38.25	%		38.25	%
State taxes		(0.39	)%		–	%		(0.32	)%
Permanent differences		(0.31	)%		(0.09	)%		(7.01	)%
Non-deductible share-based compensation		(19.70	)%		(58.90	)%		–	%
Foreign tax rate differential		(0.05	)%		–	%		0.22	%
Change in tax rate		(6.33	)%		–	%		–	%
Prior year true up		–	%		(0.04	)%		(0.34	)%
Valuation allowance		(11.90	)%		20.23	%		(35.98	)%
Other net		(0.01	)%		–	%		–	%
Total		(0.44	)%		(0.56	)%		(5.18	)%

Deferred tax assets consist of the following at:

	Year Ended December 31,
	2017			2016 (As Restated)			2015 (As Restated)
Deferred tax assets:
Net operating loss carryforward	$	2,445,965		$	679,797		$	174,942
Temporary differences		241,649			63,172			17,099
Share-based compensation		430,614			–			917,977
Total gross deferred tax assets	$	3,118,228		$	742,969		$	1,110,017
Deferred tax liabilities
Property and equipment		(17,835	)		–			(17,813	)
Valuation allowance		(3,100,394	)		(742,969	)		(1,092,204	)
Net deferred tax assets	$	–		$	–		$	–

At December 31, 2017, the Company had federal net operating losses of approximately $4.7 million which will begin to expire in 2031 and could be subject to certain limitations under section 382 of the Internal Revenue Code.

The Company has provided a valuation allowance at December 31, 2017, 2016 and 2015 of $3,100,394, $742,969, and $1,110,017, respectively, for its net deferred tax assets as it cannot conclude it is more likely than not all of the estimated net deferred tax assets will be realized. The valuation allowance increased by $2,357,426 and decreased by $349,235 in 2017 and 2016, respectively.

As of December 31, 2017, 2016, and 2015, the Company did not have any unrecognized tax benefits. The Company's policy is to recognize interest and penalties related to income tax matters in income tax expense. The Company currently has no federal or state tax examinations in progress nor has it had any federal or state tax examinations since its inception.

Our ability to utilize the domestic net operating losses (NOLs) and tax credit forwards may be limited due to ownership change limitations that may have occurred or that could occur in the future, as required by the Internal Revenue Code Section 382, as well as similar state provisions. An “ownership change,” as defined by 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 or public groups. Any limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization.

The Tax Cuts and Jobs Act of 2017 (the “2017 Tax Act”), which became law on December 22, 2017, will reduce the U.S. Federal corporate tax rate from 35% to 21% for tax years beginning in 2018. The Company remeasured its net deferred tax assets and liabilities as a result of the 2017 Tax Act along with the corresponding valuation allowance resulting in no net expense or benefit. The result related to the 2017 Tax Act is a provisional amount that reflects the Company’s reasonable estimate at this time and is subject to adjustment during a measurement period not to exceed one year from enactment in accordance with guidance from the Securities and Exchange Commission.