Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.19.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes

The provision for income taxes consists of the following at December 31, 2018 and 2017:
 
2018
 
2017
Current tax provision
$

 
$
(91,477
)
Deferred tax benefit

 
(1,406,599
)
Total tax benefit
$

 
$
(1,498,076
)


In 2017, we recognized an income tax benefit of $1,498,076 due to the passing of the Tax Cuts and Jobs Act in December 2017. The new law reduced corporate income tax rates from 35% to 21%. As a result, the deferred tax assets and liabilities recorded in the consolidated balance sheets were reevaluated at the new tax rates. Both the deferred tax assets and the deferred tax liabilities were reduced. The decrease in the deferred tax liability resulted in the one-time income tax benefit.

A reconciliation of the expected Federal statutory rate to our actual rate as reported for each of the periods presented is as follows:
 
2018
 
2017
Federal statutory rate
21
%
 
34
%
State income tax rate, net of federal benefit
(1
%)
 
4
%
Permanent differences
(2
%)
 
(2
%)
Impact in changes in tax law
%
 
22
%
Change in valuation allowance
(18
%)
 
(25
%)
 
%
 
33
%


Deferred Income Taxes
 
Deferred income taxes are the result of temporary differences between book and tax basis of certain assets and liabilities, timing of income and expense recognition of certain items and net operating loss carry-forwards.
 
We assess temporary differences resulting from different treatments of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are recorded in the consolidated balance sheets. We evaluate the realizability of our deferred tax assets on a regular basis, an exercise that requires significant judgment. In the course of this evaluation we considered our recent history of tax losses, the economic conditions in which we operate, recent organizational changes and our forecasts and projections. We believe it is more likely than not that essentially none of our deferred tax assets will be realized, and we have recorded a valuation allowance for the net deferred tax assets that may not be realized as of December 31, 2018 and 2017.

The following is a schedule of the deferred tax assets and liabilities as of December 31, 2018 and 2017:
 
2018
 
2017
Deferred tax assets:
 
 
 
Net operating loss carry forward
$
31,473,506

 
$
29,622,135

Intangible assets
863,400

 
1,278,900

Stock based expenses

 
1,176,900

Accrued expense
142,000

 
362,000

Deferred rent
27,000

 
33,400

Allowance for doubtful accounts
17,500

 
23,200

Other
140,300

 
7,200

Subtotal
32,663,706

 
32,503,735

Less valuation allowance
(32,663,706
)
 
(32,503,735
)
Total

 

Deferred tax liabilities:
 

 
 

Intangible assets and property and equipment
2,162,500

 
2,307,600

Other
177,332

 
24,300

Total
2,339,832

 
2,331,900

Total deferred tax liabilities
$
(2,339,832
)
 
$
(2,331,900
)

 
The net operating losses amounted to approximately $89,272,000 and expire beginning 2021 through 2038. Pursuant to Internal Revenue Service Code Section 382, the use of certain of the Company’s net operating loss carry forwards are limited due to a cumulative change in ownership.
 
We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ending December 31, 2015 through 2017. Our state income tax returns are open to audit under the statute of limitations for the same periods.

We recognize interest and penalties related to income taxes in income tax expense. We have incurred no penalties and interest for the years ended December 31, 2018 and 2017.