Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.19.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12 - Income Taxes

  

On December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), which significantly modified U.S. corporate income tax law, was signed into law by President Trump. The TCJA contains significant changes to corporate income taxation, including but not limited to the reduction of the corporate income tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and generally eliminating net operating loss carrybacks, allowing net operating losses to carryforward without expiration, one-time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits (including changes to the orphan drug tax credit and changes to the deductibility of research and experimental expenditures that will be effective in the future). Notwithstanding the reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain, including to what extent various states will conform to the newly enacted federal tax law.

 

The Company has not recorded the necessary provisional adjustments in the financial statements in accordance with its current understanding of the TCJA and guidance currently available as of this filing. But is reviewing the TCJA’s potential ramifications.

 

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 as of December 31, 2018 and 2017 are summarized below.

 

In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2018, and 2017, management determined it is More likely than not that the Deferred Tax Assets will not be utilized, since a loss Company to date and no evidence of income in the past.

 

No federal tax provision has been provided for the years ended December 31, 2018 and 2017 due to the losses incurred during such periods. Reconciled below is the difference between the income tax rate computed by applying the U.S. federal statutory & estimated State tax rate and the effective tax rate for the years ended December 31, 2018 and 2017.

 

    2018     2017  
Net operating loss carryforward   $ (3,373,837 )   $ (2,029,437 )
Stock based compensation     25,638       40,248  
Fair value of options     223,879        195,873  
Total deferred tax assets     (3,115,321  )     (1,793,316 )
Valuation allowance   $ 3,115,321     $ 1,793,316  
Net deferred tax asset     -       -  

 

    2018     2017  
U.S federal statutory income tax     -21 %     -34 %
State tax, net of federal tax benefit     -3 %     -6 %
Stock based compensation     - %     - %
Change in valuation allowance     24 %     50 %
Effective tax rate     - %     - %

 

At December 31, 2018 and 2017, the Company has available net operating loss carryforwards for federal and state income tax purposes of approximately $12,464,311 and $6,844,052, respectively, which, if not utilized earlier, expire through 2037.

 

Utilization of net operating loss carryforwards may be subject to substantial annual limitations due to the “change in ownership” provisions of the Internal Revenue Code Sections 382 and 383. The annual limitation may result in the expiration of substantial net operating loss carryforwards before utilization. The Company has not calculated its IRC Section 382 and 383 change of ownership to date, within the meaning of Internal Revenue Code Section 382 and 383, which would limit the use of net operating losses or render such worthless.

 

Federal, State & Local Income tax remain open by statute. The Company has not filed certain state income tax returns for the last few years, but does not believe any income tax is due, if any, it would not be material