INCOME TAXES

12 Months Ended

Dec. 31, 2021

Disclosure Text Block [Abstract]

Income Tax Disclosure

NOTE 13 – INCOME TAXES

The Company calculates its deferred tax assets and liabilities using the federal tax rate of 21% and the effective state rates, net of federal benefits of 2.4%.

The tax effect of items that give rise to the deferred tax assets and liabilities are as follows:

	December 31, 2021			December 31, 2020
Deferred tax assets:
Net operating loss carry forward	$	25,931,122		$	25,191,672
Stock-based compensation		1,372,350			1,699,706
Fixed assets		670,212			693,139
Total deferred tax assets		27,973,684			27,584,517
Deferred tax liabilities:
Less: valuation allowance		(27,973,684	)		(27,584,517	)
	$	-		$	-

In assessing the realization of deferred tax assets, management determines whether it is more likely than not some, or all, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the carryforward period as well as the period in which those temporary differences become deductible. Management considers the reversal of taxable temporary differences, projected taxable income and tax planning strategies in making this assessment. Based upon historical losses and the possibility of continued losses over the periods that the deferred tax assets are deductible, management believes it is more likely than not that the Company will not realize the benefits of these deferred tax assets and thus recorded a valuation allowance against the entire deferred tax asset balance. The valuation allowance decreased by $389,167 and increased by $570,660 in the years ended December 31, 2021 and 2020, respectively.

At December 31, 2021, the Company had net operating loss carry-forwards of $108,834,687 for federal income tax purposes and $73,902,721 for state and local income tax purposes. The federal net operating loss carry-forwards are available to be utilized against future taxable income through fiscal year 2040 and state loss carry-forwards expire from 2025 through 2040, subject to substantial restrictions on the utilization of net operating losses in the event of an “ownership change” as defined by the Internal Revenue Code. Utilization of the Company’s federal and state net operating loss carry-forwards are subject to limitations as a result of these restrictions. No amounts were provided for unrecognized tax benefits attributable to uncertain tax positions as of December 31, 2021 and 2020.

The Internal Revenue Code of 1986, as amended (the Code) provides for a limitation of the annual use of net operating losses following certain ownership changes (as defined by the Code) that could limit the Company’s ability to utilize these carryforwards. At this time, the Company has not completed a study to assess whether an ownership change under Section 382 of the Code has occurred, or whether there have been multiple ownership changes since the Company’s formation, due to the costs and complexities associated with such a study. The Company may have experienced various ownership changes, as defined by the Code, as a result of past financing transactions. Accordingly, the Company’s ability to utilize the aforementioned carryforwards may be limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for Federal or state income tax purposes.

The Tax Cuts and Jobs Act (“Tax Act”) was enacted on December 22, 2017.  The Tax Act reduces the US corporate rate from 35% to 21% beginning in 2018.  The Company remeasured its deferred tax assets based upon the new 21% tax rate.  As a result, the Company decreased its deferred tax assets by $15,181,980 with a corresponding adjustment to its valuation allowance for the year ended December 31, 2017.

A reconciliation of the differences between the effective and statutory income tax rates is as follows:

	December 31, 2021					December 31, 2020
Federal statutory rate	$	(689,480	)	21.0	%	$	(690,419	)	21.0	%
State income taxes		(87,192	)	2.7	%		(88,957	)	2.7	%
Change in valuation allowance		389,167		(11.9	)%		722,966		(21.9	)%
Amortization of discount on PIK Notes		84,396		(2.6	)%		-		-
PPP loan forgiveness		(102,385	)	3.1	%		-		-
Expired options		343,316		(10.5	)%		-		-
Miscellaneous		62,178		(1.8	)%		(57,410	)	(1.8	)%
	$	(0	)	(0.1	)%	$	—		0.0	%