Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company files U.S. federal and various U.S. state income tax returns. Due to the Company’s losses, there was no income tax expense for the years ended December 31, 2019 and 2018.
The income tax provision differs from the amount using the statutory federal income tax rate of 21% for 2019 and 2018 for the following reasons:
December 31,
2019
December 31,
2018
Amount % Amount %
Tax benefit at the U.S. federal statutory rate $ (2,887,894)   (21.00) % $ (1,956,137)   (21.00) %
Tax rate change —    —    —    —  %
Permanent differences 24,939    0.18  % 119,266    1.28  %
Return to provision (24,608)   (0.18) % (94,219)   (1.01) %
Valuation allowance 2,887,563    21.00  % 1,931,090    20.73  %
Effective income tax rate $ —    —  % $ —    —  %
The effective income tax rate varied from the statutory rate in 2019 and 2018 primarily due to the increase in the valuation allowance. 
Deferred tax assets and liabilities consist of the following:
December 31,
2019
December 31,
2018
Assets related to:
Accounts payable and accrued liabilities $ 588,037    $ 1,224,599   
Net operating losses and start-up costs 9,891,122    6,240,595   
Total deferred tax assets 10,479,159    7,465,194   
Valuation allowance for deferred tax assets (10,297,430)   (7,409,867)  
Net deferred tax 181,729    55,327   
Liabilities related to:
Accounts receivable and prepaid expenses (20,226)   (27,976)  
Depreciation and amortization (161,503)   (27,351)  
Net deferred tax liabilities (181,729)   (55,327)  
Net deferred tax assets $ —    $ —   

As of December 31, 2018, the Company’s filed tax returns include federal net operating loss (“NOL”) carryforwards of $29,602,639, of which $24,727,679 begin expiring in 2036 through 2037. Additionally, the Company estimates an NOL carryforward of $17,460,252 for the year ended December 31, 2019. Under the new Tax Cuts and Jobs Act from 2018, carryforwards do not expire, but can only offset 80% of taxable income in the year the loss carryforward is used.
The Company has recorded a full valuation allowance against its net total deferred tax assets as of December 31, 2019 and 2018 because management determined that it is not more-likely-than not that those assets will be realized. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of deferred assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
During the year ended December 31, 2019 and 2018, the valuation allowance increased by $2,879,647 and $1,931,090, respectfully, due to additional net operating losses.