Income Taxes

12 Months Ended

Dec. 31, 2018

Note 7 - Income Taxes

Through December 31, 2018, the Company incurred net operating losses for federal tax purposes of approximately $55,000,000. The net operating loss carry forwards may be used to reduce taxable income through the years 2028 to 2038. The availability of the Company's net operating loss carry forwards is subject to limitation if there is a change in the ownership of the Company's stock of 50% or more.

A reconciliation of the expected tax computed at the statutory federal income tax rate to the provision for income taxes is as follows:

	2018			2017
Expected tax benefit at 21%	$	(1,970,000	)	$	(3,291,000	)
Tax Reform					6,210,000
Change in valuation allowance		1,890,000			(3,070,000	)
Other		80,000			151,000
Provision for income taxes	$	-		$	-

The net deferred tax asset at December 31, 2018 and 2017 was $11,910,000 and $10,020,000, respectively. In assessing the potential realization of these 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. At December 31, 2018 and 2017, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates. Significant components of the deferred tax assets (liabilities), are approximately as follows:

	2018			2017
Net operating loss carry forwards	$	11,540,000		$	9,860,000
Accrued liabilities		280,000			210,000
Stock compensation		(50,000	)		(90,000	)
Depreciation		160,000			60,000
Prepaid expenses		(20,000	)		(20,000	)
Other		-			-
Deferred tax assets, net		11,910,000			10,020,000
Valuation allowance		(11,910,000	)		(10,020,000	)
Net deferred tax asset	$	-		$	-

Although the Company is not under examination, the tax years for 2015 and forward are subject to examination by United States tax authorities.

The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2018, and 2017, there were no accrued interest or penalties related to uncertain tax positions.

On December 22. 2017. The Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act contains significant changes to corporate taxation, including (i) the reduction of the corporate income tax rate to 21%, (ii) the acceleration of expensing for certain business assets, (iii) the one-time transition tax related to the transition of U.S. international tax from a worldwide tax system to a territorial tax system, (iv) the repeal of the domestic production deduction, (v) additional limitations on the deductibility of interest expense and (vi) expanded limitations on executive compensation.

The key impact of the Tax Act on the Company’s financial statements for the year ended December 31, 2017 was the re-measurement of deferred tax balances to the new corporate tax rate. In order to calculate the effects of the new corporate tax rate on the Company’s deferred tax balances, ASC 740 “Income Taxes” (“ASC 740’) required the re-measurement of the Company’s deferred tax balances as of the enactment date of the Tax Act, based on the rates at which the balances are expected to reverse in the future. The re-measurement of the Company’s deferred tax balances resulted in a net reduction in deferred tax assets of $6.2 million offset with a corresponding adjustment to the valuation allowance.