We account for income taxes using the asset and liability method, the objective of which is to establish deferred tax assets and liabilities for the temporary differences between the financial reporting and the tax bases of our assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. A valuation allowance related to deferred tax assets is recorded when it is more likely than that some portion or all of the deferred tax assets will be realized.

 

The provision (benefit) for income taxes for the years ended

 

		December 31, 201 7				December 31, 201 6
Current tax expense (benefit):
Federal		$	-			$	-
State			-				-
Deferred tax expense (benefit):
Federal			5,418,000				(787,000	)
State			127,000				(462,000	)
Change in valuation allowance			(5,545,000	)			1,249,000
Provision for income taxes		$	-			$	-

 

The difference between income taxes at the statutory federal income tax rate and income taxes reported in the statements of operations is attributable to the following:

 

		December 31, 201 7				December 31, 201 6
Income tax benefit at the federal statutory rate		$	(1,846,000	)		$	(1,415,000	)
State income tax (benefit), net of effect of federal taxes			84,000				(305,000	)
Expiration of non-qualified stock options			-				31,000
Expiration of warrants			221,000				424,000
Non-deductible debt discount			182,000				-
Change in tax rate			6,869,000				-
Other			35,000				16,000
(Decrease) increase in valuation allowance			(5,545,000	)			1,249,000
Provision for income taxes		$	-			$	-

 

The deferred tax asset at

 

		201 7				201 6
Deferred income tax assets:
Net operating loss carryforwards		$	2,604,000			$	3,284,000
Deferred startup costs			9,853,000				13,906,000
Stock-based compensation			1,294,000				2,193,000
Other			153,000				66,000
			13,904,000				19,449,000
Less: Valuation allowance			(13,904,000	)			(19,449,000	)
Net deferred tax asset			-				-
Net deferred tax assets		$	-			$	-

 

On the U. S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act makes broad and complex changes to the U. S. tax code including but limited to: () reducing the U. S. federal corporate tax rate from percent to percent () elimination of the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized () changing the rules related to the usage and limitation of net operating loss carryforwards created in tax years beginning after ) generally eliminating U. S. federal income taxes on dividends from foreign subsidiaries for tax years beginning after and () implementing a territorial tax system and imposing a transition toll tax on deemed repatriated earnings of foreign subsidiaries.

 

On the SEC staff issued Staff Accounting Bulletin to address the application of U.S. GAAP on situations when a registrant does have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Reform Act.  The Company has realized the provisional tax impacts related to the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended   As of we have completed the majority of the accounting for the tax effects of the Act.  If revisions are needed as new information becomes available, the final determination of the deemed remeasurement of our deferred tax assets and liabilities or other applicable provisions of the Act will be completed as additional information becomes available, but later than year from the enactment of the Tax Act.

 

The deferred U.S. income tax expense for primarily represents a -time, non-cash expense of relating to the revaluation of deferred tax assets offset by a reduction of the valuation allowance in an equal amount. This resulted in a net effect on the provision for income tax.

 

At

 

Effective the Company adopted ASU - Compensation - Stock Compensation (Topic ) Improvement to Employer Share-Based Payment Accounting.  As a result of this adoption, the Company recognized a gross deferred tax asset of and a corresponding equal and offsetting uncertain tax position in the same amount resulting in net deferred tax asset recognition. The uncertain tax benefits included in the tabular reconciliation relate to this deferred tax asset.

 

Based upon the change in ownership rules under Section of the Internal Revenue Code of if a company issues common stock or other equity instruments convertible into common shares which result in an ownership change exceeding a limitation threshold over a rolling -year timeframe as imposed by that Section, all of that company

 

Reconciliations of the beginning and ending amounts of unrecognized tax benefits for the years ended

 

		201 7				201 6
Balance as of January 1		$	1,684,000			$	1,666,000
Additions based on enacted changes in state rate			-				18,000
Reductions based on enacted changes in rates			(572,000	)			-
Balance as of December 31		$	1,112,000			$	1,684,000

 

 

Tax years that remain subject to examination for our major tax jurisdictions include the years ended