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INCOME TAXES

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

13. INCOME TAXES

Due to recurring losses for the years ended December 31, 2018 and 2017, 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:

		2018				2017
Statutory federal rate			(21.0)	%			(35.0)	%
State income tax rate, net of federal benefit			(4.35)	%			(3.5)	%
Permanent differences, including stock based compensation			5.6	%			5.9	%
Change in valuation allowance, including effect of change in tax rates			19.75	%			23.1	%
Difference in foreign tax rates			—				9.5	%
Effective tax rate			0.0	%			0.0	%

At December 31, 2018 and 2017, the Company’s deferred tax assets were as follows:

Deferred Tax Liability		2018					2017
Property and equipment			(2,000)				(7,000)
Total deferred tax liability			(2,000)				(7,000)

Deferred Tax Assets		2018				2017
Federal and state net operating loss carry forward			12,082,000				11,767,000
Foreign net operating loss carry forward			3,123,000				1,455,000
Other temporary differences			63,000				39,000
Total deferred tax asset			15,268,000				13,261,000
Net deferred tax asset			15,266,000				13,254,000
Less valuation allowance			(15,266,000	)			(13,254,000	)
		$	—			$	—

The Company’s valuation allowance increased by $2,012,000 and $3,994,000 during 2018 and 2017 respectively. Total net operating loss carry forwards at December 31, 2018 were approximately $47.7 million, of which approximately $46.0 million, will expire through 2037 and $1.7 million attributable to the current year may be carried forward indefinitely. China has corporate tax rate of 25% with net operating loss carry forwards expiring after 5 years. The Company had $11.2 million of net operating loss carry forwards in China as of December 31, 2018. Hong Kong has a corporate tax rate of 17% with net operating loss carry forwards that don’t expire. The Company had $1.87million of net operating loss carry forwards in Hong Kong as of December 31, 2018. 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, 2018 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 25.35%. The change in blended tax rate reduced the 2017 US net operating loss carry forward deferred tax assets by approximately $5.5 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://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 740
-URI http://asc.fasb.org/topic&trid=2144680

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