INCOME TAXES

12 Months Ended

Dec. 31, 2018

3.	INCOME TAXES

The components of deferred income taxes at December 31 are as follows (in thousands):

	December 31,
	2018			2017
Accruals and reserves	$	-		$	-
Valuation allowance		-			-
Total current	$	-		$	-
NOL, AMT and general business credit carryforwards		37,607			37,557
Other		114			157
Valuation allowance		(37,721	)		(37,714	)
Total non current	$	-		$	-
Total deferred income taxes	$	-		$	-

ASC 740 requires that a valuation allowance be established when it is more-likely-than-not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period-to-period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, we take into account all evidence with regard to the utilization of a deferred tax asset including past earnings history, expected future earnings, the character and jurisdiction of such earnings, unsettled circumstances that, if unfavorably resolved, would adversely affect utilization of a deferred tax asset, carryback and carryforward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. Management has evaluated the available evidence about future taxable income and other possible sources of realization of deferred tax assets and has established a valuation allowance of approximately $38 million at December 31, 2018 and $38 million at December 31, 2017. Effective January 1, 2018, the Federal corporate income tax rate has been decreased from 34% to 21%. The effect of this change on deferred taxes and the valuation allowance at December 31, 2017 was approximately $19 million. The valuation allowance as of December 31, 2018 and 2017 includes approximately $1.8 million for net operating loss carry forwards that relate to stock compensation expense for income tax reporting purposes that upon realization, would be recorded as additional paid-in capital. The valuation allowance reduces deferred tax assets to an amount that management believes will more likely than not be realized.

The components of the income tax provision (benefit) are as follows (in thousands):

	Years Ended December 31,
	2018			2017
Provision (benefit) for income taxes
Current	$	(52	)	$	(36	)
Deferred		-		$	-
Income tax provision (benefit)	$	(52	)	$	(36	)

The 2018 and 2017 income tax benefits result from the Australian refundable research and development tax credit as explained in Note 6. Additionally, in 2018 the Company recorded a $49,000 AMT refundable tax credit, as provided for in the Tax Cuts and Jobs Act.

We have accumulated approximately $149 million in federal and $15 million in state net operating loss carryforwards (“NOLs”) and approximately $5.4 million of research and development and alternative minimum tax credit carryforwards. The federal NOLs expire between 2023 and 2038. The Arizona state NOL’s expire between 2032 and 2038. The availability of these NOL’s to offset future taxable income could be limited in the event of a change in ownership, as defined in Section 382 of the Internal Revenue Code.

A reconciliation of the difference between the provision (benefit) for income taxes and income taxes at the statutory U.S. federal income tax rate is as follows for the years ended December 31, 2018 and 2017:

	Years Ended December 31,
	2018			2017
Income tax provision (benefit) at statutory rate	$	(90	)	$	(597	)
State income taxes		(20	)		(26	)
Efect of change in federal tax rate		-			19,159
Other		51			437
Change in valuation allowance		7			(19,009	)
Net provision (benefit)	$	(52	)	$	(36	)