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

NOTE 5 - INCOME TAXES

 

The Company did not provide any Federal and State income tax for the years ended December 31, 2018 and 2017 due to the Company’s net losses.

 

A reconciliation of the provision for income taxes computed using the US statutory federal income tax rate is as follows:

 

    December 31,
    2018   2017
Tax provision at US statutory federal income tax rate   $ (558,000 )   $ (468,000 )
State income tax, net of federal benefit     —         —    
Change in valuation allowances     558,000       468,000  
     Provision for Income Taxes   $ —       $ —    

 

The significant components of the Company’s deferred tax assets were:

 

    December 31,
    2018   2017
Deferred Tax Assets:                
     Net operating loss carry forward   $ 4,376,000     $ 3,849,000  
     Capital loss carry over     630,000       630,000  
     Accrued expenses     16,000       —    
     Unrealized losses on marketable securities     9,000       2,000  
     Depreciation and other     (26,000 )     434,000  
      5,005,000       4,915,000  
Less valuation allowance     (5,005,000 )     (4,915,000 )
Net Deferred Tax Asset   $ —       $ —    

 

Deferred tax assets and liabilities reflect the effects of tax losses, credits and the future income tax effects of temporary differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

As of December 31, 2018, the Company recorded a valuation allowance of $5,005,000 for its deferred tax assets. The Company believes that such assets did not meet the more likely than not criteria to be recoverable through projected future profitable operations in the foreseeable future.

 

Effective January 1, 2007, the Company adopted FASB guidance that addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The FASB also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2018 and 2017, the Company does not have a liability for unrecognized tax benefits.

 

The Company’s net operating loss carry forward for income tax purposes as of December 31, 2018 was approximately $20,800,000, of which $18,300,000 and may be offset against future taxable income through 2037 and $2,500,000 can be carried forward indefinitely. Utilization of the Company’s net operating losses may be subject to substantial annual limitation if the Company experiences a 50% change in ownership, as provided by the Internal Revenue Code and similar state provisions. Such an ownership change would substantially increase the possibility of net operating losses expiring before complete utilization.

 

In December 2017, new tax known as Tax Cut and Jobs Act of 2017 was enacted. The new tax law includes significant changes to the U.S. corporate tax systems including a rate reduction from 35% to 21% beginning in January of 2018, a change in the treatment of foreign earnings going forward, a deemed repatriation transition tax, and changes to allow net operating losses to be carried forward indefinitely. In addition, net operating losses arising after December 31, 2017 will be limited to the lesser of the available net operating loss or 80% of the pre-net operating loss taxable income.

 

In accordance with ASC 740, the impact of a change in tax law is recorded in the period of enactment. During the fourth quarter of 2017, the Company recorded a non-cash, change in its net deferred tax balances of approximately $2,429,000 related to the tax rate change. The Company estimates that its deemed repatriation liability will not be material due to its limited international operations.

 

Uncertain Tax Positions

 

ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. In many cases the Company’s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. The Company is generally no longer subject to U.S. federal, state or local income tax examinations by tax authorities for years before 2015. However, as of December 31, 2018, the years subsequent to 2014 remain open and could be subject to examination by tax authorities including the U.S. Internal Revenue Service and major state and local tax jurisdictions in the United States.

 

Interest costs related to unrecognized tax benefits are classified as “Interest expense, net” in the accompanying consolidated statements of operations. Penalties, if any, would be recognized as a component of “General and administrative expenses.”

 

As of December 31, 2018, the Company had no liability for unrecognized tax benefits and no accrual for the payment of related interest and penalties, nor did the Company recognized any interest or penalties expense related to unrecognized tax benefits during the years ended December 31, 2018 or 2017.