DEFERRED TAXES

12 Months Ended

Dec. 31, 2021

DEFERRED TAXES

DEFERRED TAXES

NOTE 16. DEFERRED TAXES

The income tax was $0 as of December 31, 2021 and 2020.

Significant components of the Company’s deferred tax assets at December 31, 2021 and 2020 are shown below. A valuation allowance has been established as realization of such deferred tax assets has not met the more likely-than-not threshold requirement. The Company has determined it is not more likely than not that its deferred tax assets will be recovered. If the Company’s judgment changes and it is determined that the Company will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense.

As of December 31, 2021 and 2020, the Company had federal and state net operating loss carryforwards of approximately $36 million and $41 million, respectively. Of the current net operating loss carryforwards, $27 million expire starting in 2033 through 2037 and $7 million will expire starting in 2041, and $43 million do not expire. The Company is currently evaluating whether there have been one or more ownership changes pursuant to IRC Sections 382 and 383.  If the Company determines there were one or more ownership changes under these rules, the use of its U.S. federal and state net operating loss carryforwards may be limited and/or otherwise expire unused. The Company believes that any limitation as a result of IRC Section 382 and 383 would be immaterial to the financial statements due to the full valuation allowance on its deferred tax assets.

The components of net deferred tax assets are as follows:

	December 31,
	2021		2020
Net operating loss carryforwards	$	9,113,554	$	8,438,428
Equity-based instruments		1,991,225		2,883,318
Long-lived assets and other		192,201		203,274
Capital loss carryforward		93,218		119,915
Deferred tax asset valuation allowance		(11,390,198)		(11,644,935)
	$	—	$	—

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:

	Year ended December 31,
	2021		2020
Income tax benefit at statutory rate	$	(1,862,570)	$	(1,607,608)
State income tax benefit, net of Federal benefit		(88,898)		(178,226)
280E Disallowance		946,481		94,178
Equity-based instruments		64,735		103,372
Fair market value adjustment/loss on extinguishment – derivative liabilities		312,590		(154,517)
Amortization of debt discount		176,128		412,823
Other		706,270		47,946
Valuation allowance		(254,736)		1,282,032
	$	—	$	—