Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 11- INCOME TAXES

We did not provide any current or deferred U.S. federal income tax provision or benefit for any of the periods presented because we have experienced operating losses since inception. When it is more likely than not that a tax asset cannot be realized through future income the company must allow for this future tax benefit. We provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn income sufficient to realize the deferred tax assets during the carry forward period.

We have not taken a tax position that, if challenged, would have a material effect on the financial statements for the years ended December 31, 2018 and 2017 applicable under FASB ASC 740. We did not recognize any adjustment to the liability for uncertain tax position and therefore did not record any adjustment to the beginning balance of accumulated deficit on the balance sheet. All of our tax returns remain open.

As of December 31, 2018 and 2017, we had net operating loss carryforwards for tax reporting purposes of approximately $41.5 and $41.2 million. These net operating loss carryforwards, if unused, begin to expire in 2020. Utilization of approximately $1.2 million of the total net operating loss is dependent on the future profitable operation of Racore Network, Inc., a wholly owned subsidiary, under the separate return limitation rules and restrictions on utilizing net operating loss carryforwards after a change in ownership. In addition, the realization of tax benefits relating to net operating loss carryforwards is limited due to the settlement related to amounts previously due to the IRS, as discussed in Note 6 – Other Accrued Liabilities.

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences for the periods presented are as follows:

Income tax provision at the federal statutory rate	20	%
Effect on operating losses	(20	)%
	-

Net deferred tax assets consisted of the following:

	December 31, 2018			December 31, 2017
Net operating loss carry forward	$	24,810,657		$	24,596,263
Valuation allowance		(24,810,657	)		(24,596,263	)
Net deferred tax asset	$	—		$	—

A reconciliation of income taxes computed at the statutory rate is as follows:

	December 31, 2018			December 31, 2017
Computed federal income tax benefit (expense) at statutory rate of 20% and 35%	$	(222,244	)	$	(717,452	)
Depreciation and amortization		458			602
Change in payroll accruals		7,336			13,978
Stock option expense		56			469
Change in derivative liability		-			2,960
Change in valuation allowance		214,394			699,443
Income tax expense	$	-		$	-