Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10 – INCOME TAXES

Deferred income taxes are provided for the differences between the basis of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:

	For the year ended December 31,
	2017			2016
Deferred tax assets:
Net operating loss carry forwards	$	2,451,031		$	3,093,358
Allowance for uncollectible accounts		164,013			90,177
Stock-based compensation		376,226			405,616
Accounts payable		169,717			53,170
Other accruals		111,247			293,601
Compensation costs		-			11,058
Valuation allowance		(3,278,188	)		(3,955,042	)
Charitable Contributions		5,954			8,062
Net deferred tax asset	$	-			-

A reconciliation of the provision for income taxes with the amounts computed by applying the statutory Federal income tax to income from operations before provision for income taxes is as follows:

	For the year ended December 31,
	2017			2016
Statutory federal tax rate		(34.0	)%		(34.0	)%
State, taxes, net of federal benefit		(4.8	)%		(4.8	)%
Permanent differences:
Financing costs- warrant amortization		1.9	%		3.4	%
Stock options		2.2	%		-	%
Other		0.3	%		1.1	%
Loss on inducement		-	%		5.9	%
Valuation allowance		34.4	%		28.4	%
Effective tax rate		-	%		-	%

Internal Revenue Code Section 382 imposes limitations on the use of net operating loss carryovers (“NOLs”) when the stock ownership of one or more 5% shareholders (shareholders owning 5% or more of the Company’s outstanding capital stock) has increased on a cumulative basis by more than 50 percentage points.

On March 28, 2017, the stock ownership of one or more 5% shareholders (shareholders owning 5% or more of the Company’s outstanding capital stock) had increased on a cumulative basis by more than 50 percentage points, triggering a limitation under Section 382. Provided that certain requirements for business continuity are met, upon a change of ownership under Section 382, the cumulative net operating losses would be subject to an annual limitation based upon the fair value of the Company multiplied by the long-term tax exempt bond rate. The Company determined that this annual limitation was de minimis. Accordingly, the Company’s NOLs in the aggregate gross amount of $11,427,095 were not eligible to be carried forward past the date of the Section 382. This resulted in an impairment of the NOL carryover amount.

Based on a history of cumulative losses at the Company and the results of operations for the years ended December 31, 2017 and 2016, the Company determined that it is more likely than not that it will not realize benefits from the deferred tax assets. The Company will not record income tax benefits in the consolidated financial statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets. As a result of the analysis, the Company determined that a full valuation allowance against the deferred tax assets was required. The Company recognized a deferred tax expense of $1,467,847 to reflect the reduced U.S. tax rate of the Tax Act and a corresponding deferred tax benefit to reflect the reduction of the valuation allowance. As of December 31, 2017, the Company has recorded a valuation allowance of $3,278,188.

As of December 31, 2017, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $9,145,639 and $9,145,639, respectively.

The Company remains subject to examination by tax authorities for tax years 2014 through 2016. The Company files income tax returns in the U.S. federal jurisdiction and approximately 11 states.

As of December 31, 2017, management does not believe the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.