Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.8.0.1
Income Taxes
12 Months Ended
Dec. 31, 2017
Income Taxes  
Income Taxes

11.  Income Taxes

 

The Tax Reform, which was signed into law on December 22, 2017, has resulted in significant changes in the U.S. corporate income tax system.  The Tax Reform reduces the corporate income tax rate from 35% to 21%.  The effects of changes in tax rates and laws are recognized in the period in which the new legislation is enacted.  As a result, we have remeasured our deferred tax assets and liabilities at December 31, 2017 based on the new Federal income tax rate of 21%.  The Company has temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their respective income tax basis, as measured by enacted state and federal rates as follows:

 

 

 

 

 

 

 

 

 

 

 

 

December 31

    

2017

 

2016

  

2015

  

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

 

 

 

 

 Net operating loss carryforwards

 

$

27,578,200

 

$

38,299,400

 

$

33,424,100

 

 Charitable contributions

 

 

300

 

 

500

 

 

500

 

 Inventory reserves

 

 

205,800

 

 

361,300

 

 

267,700

 

 Amortization

 

 

22,800

 

 

89,500

 

 

51,400

 

 Allowance for doubtful accounts

 

 

116,900

 

 

102,300

 

 

72,300

 

 Stock-based compensation

 

 

519,900

 

 

341,400

 

 

260,600

 

Total deferred tax assets

 

 

28,443,900

 

 

39,194,400

 

 

34,076,600

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

 

 

 Depreciation

 

 

(80,500)

 

 

(83,300)

 

 

(62,400)

 

 Deferred revenue

 

 

(6,400)

 

 

 -

 

 

 -

 

Net deferred tax assets

 

 

28,357,000

 

 

39,111,100

 

 

34,014,200

 

Valuation allowance

 

$

(28,357,000)

 

$

(39,111,100)

 

$

(34,014,200)

 

 

As of December 31, 2017, the Company had net operating loss carry forwards of approximately $108.8 million to offset future taxable income which expire in various years through 2037. A valuation allowance is recorded to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more-likely-than-not that a portion or none of the deferred tax assets will be realized. After consideration of all the evidence, including reversal of deferred tax liabilities, future taxable income and other factors, management has determined that a full valuation allowance is necessary as of December 31, 2017, 2016 and 2015.  The valuation allowance decreased by $10.8 million during 2017, primarily due to the remeasurement of our deferred tax assets and liabilities as a result of the Tax Reform, which amounted to $14.5 million, offset by the current year’s net operating loss of $3.7 million.  During 2016 and 2015, the valuation allowance increased $5.1 million and $4.5 million, respectively, to offset the deferred tax benefit in the respective years.  The difference between the financial statement income tax and the income tax benefit using statutory rates is primarily due to the decrease in the valuation allowance.

 

The Company had no income tax expense or income tax benefit for 2015, 2016 and 2017 due to incurrence of net operating losses.  The Company does not believe there are any additional tax refund opportunities currently available.