Annual report pursuant to Section 13 and 15(d)

Income Tax Expense

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Income Tax Expense
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Tax Expense

Note 15 - Income Tax Expense

 

The Company utilizes the asset and liability method of accounting for income taxes in accordance with FASB ASC 740.

 

The Company’s income tax (benefit)/provision is as follows:

 

    Years Ended December 31,  
    2017     2016  
Current   $ -     $ -  
Deferred     (6,440,000 )   $ (751,000 )
Change in Valuation Allowance     6,440,000     $ 751,000  
Income Tax Benefit   $ -     $ -  

  

The reconciliation of income taxes using the statutory U.S. income tax rate and the benefit from income taxes for the years ended December 31, 2017 and 2016 are as follows:

 

    Years Ended December 31,  
    2017     2016  
Statutory U.S. Federal Income Tax Rate     (35.0 %)     (35.0 %)
New Jersey State income taxes, net of U.S.                
Federal tax effect     (6.0 %)     (6.0 %)
Tax rate change     152.0 %     0.0 %
Change in Valuation Allowance     (111.0 )%     41.0 %
Net     0.0 %     0.0 %

 

In December 2017, the Tax Cuts and Jobs Act was enacted, which reduced the U.S. statutory corporate tax rate to 21% for tax years beginning in 2018. This change resulted in a re-measurement of the federal portion of the Company’s deferred tax assets and the valuation allowance as of December 31, 2017 from 35% to the new 21% tax rate.

 

As of December 31, 2017 and 2016, the Company had Federal net operating loss carry forwards of approximately $68,600,000 and $60,100,000, expiring through the year ending December 31, 2037. As of December 31, 2017 and 2016, the Company had New Jersey state net operating loss carry forwards of approximately $17,800,000 and $9,400,000, expiring through the year ending December 31, 2024.

 

The principle components of the deferred tax assets and related valuation allowances as of December 31, 2017 and 2016 are as follows:

 

    Years Ended December 31,  
    2017     2016  
Reserves and other   $ 387,000     $ 865,000  
Net operating loss carry-forwards     15,656,000       21,618,000  
Valuation Allowance     (16,043,000 )     (22,483,000 )
Net   $ -     $ -  

 

The valuation allowance for deferred tax assets as of December 31, 2017 and 2016 was $16,043,000 and $22,483,000. The change in the total valuation for the years ended December 31, 2017 and 2016 were a decrease of $6,440,000 and an increase of $751,000. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

 

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the net operating losses and temporary differences become deductible. Management considered projected future taxable income and tax planning strategies in making this assessment. The value of the deferred tax assets was fully offset by a valuation allowance, due to the current uncertainty of the future realization of the deferred tax assets.

 

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2017, the Company had no unrecognized tax benefits and no charge during 2017, and accordingly, the Company did not recognize any interest or penalties during 2017 related to unrecognized tax benefits. There is no accrual for uncertain tax positions as of December 31, 2017.

 

The Company files U.S. federal income tax returns and a state income tax returns. The U.S. and state income tax returns filed for the tax years ending on December 31, 2014 and thereafter are subject to examination by the relevant taxing authorities.