Co-Diagnostics, Inc. Income Taxes Disclosure

NOTE 7: INCOME TAXES

 

Net deferred tax assets consist of the following components as of December 31, 2019 and 2018:

 

		2019				2018
Deferred tax assets
NOL carry-forward		$	5,131,100			$	3,841,400
Sec 179 carry-forwards			1,600				1,600
Depreciation			28,800				9,500
Valuation allowance			(5,161,500	)			(3,852,500	)
Net deferred tax asset		$	—			$	—

  

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended December 31, 2019 and 2018 due to the following:

 

		2019				2018
Book loss		$	(1,610,800	)		$	(1,630,600	)
Depreciation			6,100				(3,000	)
Meals and entertainment			2,900				400
Other non-deductible expenses			343,500				356,500
Change in valuation allowance			1,258,300				1,276,700
		$	—			$	—

 

At December 31, 2019, the Company had net operating loss carry-forwards of approximately $19,735,000 that may be offset against future taxable income from the year 2020 through 2036. No tax benefit has been reported in the December 31, 2019 and 2018, consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Additionally, DNA Logix, Inc. is a pass-through entity and therefore no provision or liability for federal income tax has been included in the consolidated financial statements for that entity.

 

Due to change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry-forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry-forwards may be limited as to use in future years.

 

The Company’s policy on the classification of interest and penalties related to income taxes is to recognize the interest and penalties in the period incurred. There were no penalties or interest incurred for the years ending December 31, 2019 and 2018, related to income taxes.