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

 

5. INCOME TAXES

 

The Company and subsidiaries file a consolidated federal income tax return. The Company’s consolidated provision for income taxes for the years ended December 31, 2018 and 2017 consists of the following:

 

    Year Ended     Year Ended  
    December 31,
2018
    December 31,
2017
 
Income Tax Expense (benefit)            
Current federal tax expense            
Federal   $ -0-     $ -0-  
State     -0-       -0-  
Deferred tax (benefit)                
Federal   $ -0-     $ -0-  
State     -0-       -0-  
Total   $ -0-     $ -0-  

 

A summary of deferred tax assets and liabilities as of December 31, 2018 and 2017 is as follows:

 

    Year Ended     Year Ended  
    December 31,
2018
    December 31,
2017
 
Deferred tax assets:            
Net operating losses     2,165,100       1,259,000  
Share based compensation     663,300       273,500  
Amortization of debt discount     346,400       -  
Reserve for inventory obsolescence   $ 53,700     $ 41,700  
Reserve for bad debt     12,400       34,200  
Less valuation allowance     (2,882,900 )     (1,398,400 )
                 
Total Deferred Tax Asset   $ 358,000     $ 210,000  

 

    Year Ended     Year Ended  
    December 31,
2018
    December 31,
2017
 
Deferred tax liabilities:            
Accumulated depreciation and amortization   $ (358,000 )   $ (210,000 )
Total deferred tax liabilities     (358,000 )     (210,000 )
                 
NET DEFERRED TAX   $ -0-     $ -0-  

 

As of December 31, 2018, the Company had approximately $6.2 million of operating loss carryforwards, which results in a Federal and State deferred tax asset of approximately $2.2 million, expiring in 2035 through 2039.

 

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

 

On the basis of this evaluation, as of December 31, 2018, a valuation allowance of approximately $2.9 million has been recorded to record only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.