SCWorx, Corp. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 10. Income Taxes

The components of Loss before benefit from income taxes for the years ended December 31, 2016 and 2015 are as follows:

	Years ended December 31,
	2016		2015
Domestic	$	4,915,041	$	386,457
Foreign
Loss before benefit from income taxes	$	4,915,041	$	386,457

The Company incurred income tax benefit of $755,647 and $0 for the years ended December 31, 2016 and 2015, respectively. The income tax benefit for the year ended December 31, 2016 and 2015 includes the following:

	Year Ended December 31,
	2016		2015
Current income tax expense:
U.S. Federal	$		$
U.S. State
Total current

Deferred:
U.S. Federal		(647,889)
U.S. State		(107,758)

Total benefit from income taxes	$	(755,647)

The income tax benefit differs from those computed using the statutory federal tax rate of 34% due to the following:

	Year Ended December 31,
	2016		2015
Expected provision at statutory federal rate	$	(1,671,113)		(135,260)
State tax-net of federal benefit		(71,120)
Change in valuation allowance		32,872		135,260
IPO related costs		54,313
Stock based compensation		882,300
Other.		17,101
	$	(755,647)

The effect of temporary differences that gave rise to significant portions of deferred tax assets as of December 31, 2016 and 2015, are as follows:

	Year Ended December 31,
	2016		2015
Deferred tax assets:
Net operating loss carryforwards	$	456,551		135,260
Accruals		16,587
Share based compensation		19,913
Start-Up Costs		382,648
Other		51
Gross deferred tax assets		875,750		135,260
Valuation Allowance		(175,644)		(135,260)
Net deferred tax assets		700,106
Fixed Assets		(9,352)
Intangibles		(690,754)
Deferred Tax Liability		(700,106)
Net deferred tax liability	$

As of December 31, 2016, the Company has a federal net operating loss carry-forward of $1.2 million available to offset future taxable income. The Company has state loss carry-forwards of $1.2 million. Future utilization of net operating losses may be limited due to potential ownership changes under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”). These net operating loss carry-forwards have expiration dates starting in 2031 through 2036.

The valuation allowance as of December 31, 2016 was $175,644. The net change in valuation allowance for the year ended December 31, 2016 was an increase of $40,384. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on consideration of these items, management has determined that enough uncertainty exists relative to the realization of the deferred income tax asset balances to warrant the application of a full valuation allowance as of December 31, 2016.

The Company has no unrecognized tax benefits during the periods presented within. By statute, all tax years are open to examination by the major taxing jurisdictions to which the Company is subject.