Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

11. INCOME TAXES

The Company and its subsidiaries are subject to 21% federal corporate income tax in US.

At December 31, 2021 and 2020, the Company had net operating loss (“NOL”) for income tax purposes; for federal income tax purposes, the NOL arising in tax years beginning after 2017 may only reduce 80% of a taxpayer’s taxable income, and may be carried forward indefinitely; for California income tax purposes, the entire NOL can be carried forward up to 20 years. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020.

The Company has NOL carry-forwards for Federal and California income tax purposes of $5.70 million and $5.06 million at December 31, 2021 and 2020, respectively. No tax benefit was reported with respect to these NOL carry-forwards in the accompanying consolidated financial statements because the Company believes the realization of the Company’s net deferred tax assets for the NOL for both federal and California State of approximately $1.18 million as of December 31, 2021, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance.

Components of the Company’s deferred tax assets as of December 31, 2021 and 2020 are as follows:

	December 31, 2021			December 31, 2020
Net deferred tax assets:
Bad debt expense	$	1,978		$	42,359
Inventory impairment (reversal)		697			(1,847	)
Operating lease charge		14,821			6,995
Depreciation and amortization		(2,561	)		(168	)
Expected income tax benefit from NOL carry-forwards		1,181,525			1,459,675
Less: valuation allowance		(1,196,460	)		(1,507,014	)
Deferred tax assets, net of valuation allowance	$	-		$	-

Income Tax Provision in the Statements of Operations

A reconciliation of the consolidated federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the years ended December 31, 2021 and 2020 is as follows:

	2021			2020
Federal statutory income tax expense (benefit) rate		(21.00	)%		(21.00	)%
State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax		(6.44	)%		(6.43	)%
Change in valuation allowance		26.93	%		26.87	%
Effective income tax rate		0.51	%		0.56	%

The provision for income tax expense for the years ended December 31, 2021 and 2020 consisted of the following:

	2021		2020
Income tax expense – current	$	3,300	$	3,300
Income tax benefit – current		-		-
Total income tax expense	$	3,300	$	3,300