Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes    The Company recognizes deferred tax assets and liabilities using the asset and liability method. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. This method requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2020, the Company’s deferred tax assets primarily relate to net operating loss (“NOL”) carryforwards that were derived from operating losses and stock based compensation from prior years. A full

valuation allowance has been applied to the Company’s deferred tax assets. The valuation allowance will be reduced when and if the Company determines it is more likely than not that the related deferred income tax assets will be realized. At December 31, 2020, the Company had federal net operating loss carry forwards, which are available to offset future taxable income, of $7,740,730. The Company’s NOL carryforwards generated prior to January 1, 2018 of $2,504,711 can be carried forward to offset future taxable income for a period of 20 years for each tax year’s loss. These NOL carryforwards begin to expire in 2035. No provision was made for federal income taxes as the Company has NOLs. All of the Company's income tax years remained open for examination by taxing authorities. The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate to the net loss before provision for income taxes for the following reasons:

	December 31, 2020		December 31, 2019
Net loss before taxes at statutory rate	$	(352,562)	$	2,852,268
Permanent items	479,115		717,020
Temporary items	312,649		(2,169,777)
Income tax expense at statutory rate	439,202		1,399,511
Valuation allowance	(864,881)		(1,576,746)
Income tax benefit per books	$	(425,679)	$	(177,235)

 

Net deferred tax assets consist of the following components as of: 

	December 31, 2020		December 31, 2019
Net operating loss carryover at statutory rate	$	3,881,105	$	3,960,658
Stock-based compensation expense	2,923,099		3,056,099
Fixed asset depreciation	(38,863)		(24,681)
Intangibles amortization	(1,081)		(997)
Other	307,044		103,604
Total	$	7,071,304	$	7,094,683
Valuation allowance	$	(7,071,304)	$	(7,094,683)
Net deferred tax asset	$	—	$	—

 

The Company had no uncertain tax positions at December 31, 2020 and December 31, 2019.

    On December 22, 2017, H.R. 1, formally known as the Tax Cut and Jobs Act (the "Act") was enacted into law. The Act provides for significant tax law changes and modifications with varying effective dates. The major change that affects the Company is reducing the corporate income tax rate from 35% to 21%. In connection with the Company’s initial analysis of the impact of the Tax Act, no discrete net tax benefit or expense in the period ended December 31, 2017 is recorded. This is primarily due to the change in valuation allowance offsets a net benefit or expense for the corporate rate reduction. Open federal tax years are December 21, 2018 and December 31, 2019. Open state tax years are July 31, 2016 (California) December 31, 2017, December 31, 2018, and December 31, 2019.