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INCOME TAXES

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

12. INCOME TAXES

Due to recurring losses for the years ended December 31, 2017 and 2016, the Company’s net tax provision was zero.

The difference between the effective income tax rate and the applicable statutory federal income tax rate is summarized as follows:

		2017				2016
Statutory federal rate			(35.0	)%			(35.0	)%
State income tax rate, net of federal benefit			(3.5	)%			(3.5	)%
Permanent differences, including stock based compensation			5.9	%			25.5	%
Change in valuation allowance			23.1	%			13.0	%
Difference in foreign tax rates			9.5	%			0.0	%
Effective tax rate			0.0	%			0.0	%

At December 31, 2017 and 2016, the Company’s deferred tax assets were as follows:

Deferred Tax Liability		2017				2016
Property and equipment			(7,000	)			—
Total deferred tax liability			(7,000				0.0

Deferred Tax Assets		2017				2016
Federal and state net operating loss carry forward			11,767,000				17,248,000
Foreign net operating loss carry forward			1,455,000				—
Other temporary differences			39,000				—
Total deferred tax asset			13,261,000				17,248,000
Net deferred tax asset			13,254,000				17,248,000
Less valuation allowance			(13,254,000	)			(17,268,000	)
		$	—			$	—

The Company’s valuation allowance decreased by $3,994,000 and $1,219,000 during 2017 and 2016 respectively. Total net operating loss carry forwards at December 31, 2017 were approximately $46.4 million. The losses, if unused, expire through 2037. During the year ended December 31, 2017 the Company began operations in China and Hong Kong. China has corporate tax rate of 25% with net operating loss carry forwards expiring after 5 years. The Company had $5.7 million of net operating loss carry forwards in China as of December 31, 2017. Hong Kong has a corporate tax rate of 17% with net operating loss carry forwards that don’t expire. The Company had $237,000 of net operating loss carry forwards in Hong Kong as of December 31, 2017. The Company’s net operating loss carry forwards may be limited due to ownership changes pursuant to Internal Revenue Code section 382. Effective December 22, 2017 a new tax bill was signed into law that reduced the federal income tax rate for corporations from 35% to 21%. The new bill reduced the blended tax rate for the Company from 38.5% to 25.4%. The change in blended tax rate reduced the 2017 net operating loss carry forward deferred tax assets by approximately $6.1 million.

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- References

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- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI http://asc.fasb.org/topic&trid=2144680

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