Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 9 – INCOME TAXES

The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2021 and 2020. The Company accounts for income taxes in accordance with ASC 740, which requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a full valuation allowance.

The Company’s income tax expense for the years ended December 31, 2021 and 2020 are summarized below:

	December 31, 2021			December 31, 2020
Current:
Federal	$	-		$	-
State		-			-
Foreign		-			-
Total current	$	-		$	-
Deferred:
Federal	$	(6,076,003	)	$	(4,502,016	)
State		-			-
Foreign		(240,902	)		(480,666	)
Change in valuation allowance		6,316,905			4,982,682
Total deferred		-			-
Income tax provision (benefit)	$	-		$	-

The Company’s deferred tax assets are as follows:

	December 31, 2021			December 31, 2020
Deferred tax assets:
Net operating loss carryforwards	$	13,087,758		$	6,807,300
Research and development tax credit		785,761			1,092,345
Intangibles		143,854			136,226
Stock compensation		1,054,242			761,741
Total deferred tax assets		15,071,615			8,797,612
Valuation allowances		(15,071,615	)		(8,797,612	)
Net deferred tax assets	$	-		$	-

The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows:

	December 31, 2021			December 31, 2020
Statutory rate		21.00	%		21.00	%
State rate		0.00	%		0.00	%
Foreign		(0.54	)%		(1.81	)%
Permanent book/tax differences		(1.95	)%		(0.26	)%
Research and development credit		1.07	%		5.09	%
Changes in valuation allowance		(19.58	)%		(24.02	)%
Total		-			-

As of December 31, 2021 and 2020, the Company had gross federal income tax net operating loss (“NOL”) carryforwards of $59,111,972 and $30,126,830, respectively, and federal research tax credits of $1,047,681 and $1,486,704, respectively. Additionally, the Company had gross foreign income tax net operating loss carryforwards of $2,247,481 and $1,602,220 as of December 31, 2021 and 2020, respectively. The federal and foreign NOL have an indefinite life while the federal research tax credits will expire by 2041.

Utilization of U.S. net operating losses and tax credit carryforwards may be limited by “ownership change” rules, as defined in Sections 382 and 383 of the Code. Similar rules may apply under state tax laws. The Company has not conducted a study to-date to assess whether a limitation would apply under Sections 382 and 383 of the Code as and when it starts utilizing its net operating losses and tax credits. The Company will continue to monitor activities in the future. In the event the Company previously experienced an ownership change, or should experience an ownership change in the future, the amount of net operating losses and research and development credit carryovers available in any taxable year could be limited and may expire unutilized.

The CARES Act was signed into law on March 27, 2020 as a response to the economic challenges facing U.S. businesses caused by the COVID-19 global pandemic. The CARES Act allowed net operating loss incurred in 2018-2020 to be carried back five years or carried forward indefinitely, and to be fully utilized without being subjected to the 80% taxable income limitation. Net operating losses incurred after December 31, 2020 will be subjected to the 80% taxable income limitation. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion, or all, of the deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during periods in which those temporary differences become deductible.

Due to the uncertainty surrounding the realization of the benefits of its deferred assets, including NOL carryforwards, the Company has provided a 100% valuation allowance on its deferred tax assets at December 31, 2021.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740, Income Taxes. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2021, the Company had a reserve for uncertain tax positions of $261,920, and no interest or penalties have been charged to the Company for the years ended December 31, 2021 and 2020. If incurred, the Company will classify any interest and penalties as a component of interest expense and operating expense, respectively. If recognized, $261,920 of the reserve for uncertain tax positions would favorably affect the Company’s effective tax rate.

A reconciliation of the change in the unrecognized tax positions for the year ended December 31, 2021 is as follows:

	Federal and State
Balance at December 31, 2020	$	394,358
Additions for tax positions related to current year		110,827
Decreases for tax positions related to prior years		(243,265	)
Balance at December 31, 2021	$	261,920