G. INCOME TAXES

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

The Company has not recorded any income tax expense or benefit for the years ended December 31, 2018 and 2017 due to its history of net operating losses.

The reconciliation of income tax expenses (benefit) at the statutory federal income tax rate of 21% and 34% for the periods ended December 31, 2018 and December 31, 2017 is as follows:

	December 31,
	2018			2017
U.S. federal tax benefit at statutory rate	$	(2,970,250	)	$	(3,005,491	)
State income tax benefit, net of federal benefit		(246,376	)		(346,057	)
Stock compensation		68,249			169,312
Interest		1,677,118			-
Other nondeductible, including goodwill impairment		1,257			(71,044	)
Change in state tax rate		45,864			(426,159	)
Change in the federal tax rate		-			17,474,188
Federal and state net operating loss adjustments		451,652			774,875
Other, including effect of tax rate brackets		(31,810	)		(265,181	)
Change in valuation allowance		1,014,296			(14,304,443	)
	$	-		$	-

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

	December 31,
Deferred Tax Assets	2018			2017
Net operating loss carryforwards	$	33,283,250		$	32,239,768
Accruals and other		509,069			567,090
Capital loss carryforwards		16,708			16,466
Valuation allowance		(33,796,295	)		(32,781,999	)
Net deferred tax assets		12,732			41,325
Deferred Tax Liabilities
Other liabilities		(12,732	)		(41,325	)
Net Deferred Tax Liabilities	$	-		$	-

The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The Company periodically evaluates the recoverability of the deferred tax assets. At such time that it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced. The net increase in the valuation allowance during 2018 was approximately $1.0 million.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted into law, which reduced the federal corporate income tax rate to 21% for tax years beginning after December 31, 2017. As a result of the new enacted tax rate, the Company adjusted its deferred tax assets as of December 31, 2017, by applying the new 21% rate, which resulted in a decrease to the net deferred tax asset of approximately $17.5 million.

The SEC staff issued SAB 118 which will allow the Company to record provisional amounts related to accounting for the tax legislation during a measurement period which is similar to the measurement period used when accounting for business combinations. The measurement period has ended and the Company's accounting related to the 2017 Tax Cuts and Jobs Act is complete. The Company did not make any measurement-period adjustments related to the provisional items recorded as of December 31, 2017 but will continue to assess the impact of the Tax Reform Act on its business and consolidated financial statements as additional guidance or interpretations are released.

As of December 31, 2018, the Company had federal and state net operating loss carryforwards of approximately $137.9 million and $109.4 million available to offset future federal and state taxable income, respectively. Federal net operating losses of $131.4 million begin to expire in 2019, while the remaining $6.5 million carryforward indefinitely. State net operating losses begin to expire in 2024.

Utilization of the net operating loss carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of the net operating losses before utilization.

Management has evaluated all other tax positions that could have a significant effect on the financial statements and determined the Company had no uncertain income tax positions at December 31, 2018.

The Company files U.S. and state income tax returns with varying statutes of limitations. The tax years 1999 and forward remain open to examination due to the carryover of unused net operating losses or tax credits.