Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.20.1
INCOME TAXES
12 Months Ended
Dec. 31, 2019
INCOME TAXES  
Note 19 - Income Taxes

The components of the income tax provisions for 2019 and 2018 are as follows:

 

 

2019

 

2018

 

Current provision:

 

Federal

 

$

-

 

$

-

 

State

 

-

 

-

 

Deferred benefit:

 

Federal

 

-

 

-

State

 

-

 

-

 

-

 

-

Change in valuation allowance

 

-

 

-

 

Total Provision

 

$

-

 

$

-

 

The difference between the income tax provision and income taxes computed using the U. S. federal income tax rate of 21% consisted of the following:

 

 

2019

 

2018

 

Provision at statutory rate

 

21.0

%

 

21.0

%

State taxes, net of federal benefit

 

6.98

%

 

6.98

%

Nondeductible and other items

 

(0.07

)%

 

(0.03

)%

Change in valuation allowance

 

(27.91

)%

 

(27.95

)%

Total

 

(0.0

)%

 

(0.0

)%

 

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred taxes as of December 31, 2019 and 2018 are as follows:

 

 

2019

 

2018

 

Deferred tax assets:

 

Allowance for doubtful debt

 

$

7,598

 

$

6,926

 

Stock options issued for services

 

1,632,377

 

1,082,303

 

Net operating loss carryforward

 

4,766,552

 

3,126,434

 

Other

 

19,516

 

560

 

Total deferred tax assets

 

6,426,043

 

4,216,223

 

Deferred tax liabilities:

 

Royalty obligation

 

(708,046

)

 

-

 

Other

 

(42,915

)

 

(229,598

)

Total deferred tax liabilities

 

(750,961

)

 

(229,598

)

Deferred tax asset

 

5,675,082

 

3,986,625

 

Valuation allowance

 

(5,675,082

)

 

(3,986,625

)

 

A full valuation allowance has been provided against the Company's deferred tax assets at December 31, 2019 as the Company believes it is more likely than not that sufficient taxable income will not be generated to realize these temporary differences.

 

The Company has Federal net operating losses (NOLs) of approximately $17.0 million which begin to expire in the years beginning in 2033. Pursuant to Section 382 of the Internal Revenue Code, use of the Company's NOLs and credit carry forwards may be limited if the Company experiences a cumulative change in ownership of greater than 50% in a moving three-year period.

 

The Company also has federal credits that begin to expire 2031 and state tax credits that may be carried forward indefinitely.

 

The Company provides for uncertain tax positions when such tax positions do not meet the recognition thresholds or measurement standards as set forth in ASC Topic 740 Income Taxes, regarding accounting for uncertainty in income taxes. Amounts for uncertain tax positions are adjusted in periods when new information becomes available or when positions are effectively settled. There are no unrecognized benefits related to uncertain tax positions as of December 31, 2019. The Company does not anticipate that there will be material change in the liability for unrecognized tax benefits within the next 12 months.

 

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cut and Jobs Act (the “Tax Act”). The Tax Act establishes new tax laws that affects 2018 and future years, including a reduction in the U.S. federal corporate income tax rate to 21%, effective January 1, 2018. Valuation allowance increased $1,688,457 during the year ended December 31, 2019.