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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Note 4 – Income Taxes

The Company utilizes FASBASC740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

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.

The Company generated a deferred tax asset through net operating loss carry-forwards. Based upon Management’s evaluation, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the benefit derived from net operating loss carry-forwards.

Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The Company does not have any uncertain tax positions.

Income tax expense for the years ended December 31, 2017 and 2016 was $289,811 and $944,358, respectively, due to Foreign Income Tax relating to NomadChoice in Australia.

The table below summarizes the differences between the U.S. statutory federal rate and the Company’s effective tax rate for the years ended December 31, 2017 and 2016:

		December 31, 2017				December 31, 2016
U.S. Statutory Rate			34	%			34	%
U.S. effective rate in excess of AU/CA rate			(1	)%			(1	)%
U.S. valuation allowance			(34	)%			(34	)%
Foreign Tax - Australia/Canada			40	%			638	%
Total provision for income taxes			39	%			637	%

The Company has deferred tax assets, which have been fully reserved, as follows as of December 31, 2017 and 2016:

		December 31, 2017				December 31, 2016
Deferred tax assets		$	7,174,556			$	12,950,124
Valuation allowance for deferred tax assets			(7,174,556	)			(12,950,124	)
Net deferred tax assets		$	-			$	-

Taxes accrued and paid for the tax year December 31, 2016 are attributable to NomadChoice Pty, Ltd., the Company’s wholly-owned subsidiary which is subject to income taxes in Australia, the jurisdiction in which it operates. Tax expense was $289,811 and $944,358 for 2017 and 2016, respectively. The effective tax rate is attributable to the Company’s world wide income/(loss) as it relates to the income tax expense due in Australia.

The “TCJA” added a one-time taxation of offshore earnings for the period ending December 31, 2017 (IRC Sec. 965), regardless of whether they are repatriated (“Deemed Repatriation”). The Company anticipates the one-time taxation of offshore earnings relating to its foreign subsidiaries is applicable for the 2017 year end. The Company is reviewing its potential tax liability at December 31, 2017, but has not fully completed the view. It is anticipated that such amount will not be a material amount at December 31, 2017.

The Company also has net operating loss carryforwards of approximately $33,634,744 and $32,720,733 (United States and Canada) included in the deferred tax asset table above for 2017 and 2016, respectively, the majority attributable to the acquisition of Breakthrough Products, Inc. However, due to limitations of carryover attributes and separate return limitation year rules, it is unlikely the company will benefit from the NOL’s and thus Management has determined a 100% valuation reserved is required. Further, the Company has not completed an evaluation of the NOL’s attributable to Breakthrough Products, Inc. at the date of this report.

The total deferred tax asset is calculated by multiplying a domestic (US) 21 percent marginal tax rate for 2017 and 36 percent marginal tax rate for 2016 by the cumulative Net Operating Loss Carryforwards (“NOL”).The Company currently has net operating loss carryforwards approximately aggregating $33,634,744 and $32,720,733 for 2017 and 2016, respectively, which expire through 2035. The deferred tax asset related to the NOL carryforwards Management has determined based on all the available information that a 100% Valuation reserve is required.

For U.S. purposes, the Company has not completed its evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382, change of ownership rules. If the Company has had a change in ownership, the NOL’s would be limited as to the amount that could be utilized each year, based on the Code.