Income Taxes

12 Months Ended

Dec. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 7: Income Taxes

Income tax expense from continuing operations consists of the following:

	December 31,			December 31,
	2020			2019
Current income tax expense/(benefit)
Federal		—			—
State		—			—
Total current income tax expense/(benefit)		—			—
Deferred income tax expense/(benefit)
Federal		(840,812	)		27,096
State		(146,541	)		4,811
Total deferred tax expense/(benefit)		(987,353	)		31,907
Total income tax expense/(benefit)		(987,353	)		31,907

Items accounting for the differences between income taxes at statutory income tax rates and the actual effective rate are as follows:

Year Ended December 31,	2020			2019
Federal Statutory Rate		21.00	%		21.00	%
Effective State Rate		3.66	%		3.66	%
Incentive Stock Options		-2.01	%		-1.81	%
PPP Forgiveness		0.68	%		0.00	%
Officers Life Insurance		-0.01	%		-0.04	%
Meals And Entertainment		0.00	%		-0.01	%
Organizational Costs		0.00	%		0.00	%
R&D Credit		0.91	%		4.61	%
Change In Valuation Allowance		11.57	%		-25.96	%
Prior Year Adjustments		0.91	%		-4.09	%
Other		-0.14	%		-1.55	%
Effective Rate		36.57	%		-4.19	%

The components of deferred income tax assets and liabilities were as follows:

	December 31,			December 31,
	2020			2019
Deferred tax assets
Loss carryforwards		2,585,042			1,933,118
Marketable securities		—			121,212
Non-qualified stock options		—			—
R&D Credits		378,524			329,186
Less valuation allowance		(2,060,283	)		(2,372,656	)
Deferred tax assets		903,283			10,860
Deferred tax liabilities
Depreciation/amortization		(6,087	)		(10,860	)
Intangible assets		(897,196	)		(987,353	)
Deferred tax liabilities		(903,283	)		(998,213	)
Totals		—			(987,353	)

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to reverse.

The Company records a valuation allowance for certain temporary differences for which it is more likely than not that it will not receive future tax benefits. The Company assesses its past earnings history and trends and projections of future net income. The Company recorded a valuation allowance for the entire amount of the net deferred tax asset at December 31, 2020 and 2019.  The change in the valuation allowance during the years ended December 31, 2020 and 2019 was an  increase/(decrease) of ($312,000) and $198,000, respectively. The Company will continue to review this valuation allowance and make adjustments as appropriate.

As of December 31, 2020 and 2019, the Company maintained net operating loss (“NOL”) carryforwards of approximately $10,483,000 and $7,839,000. Use of NOL carryforwards are limited by the provisions of Section 382 of the Internal Revenue Code. At this point, the Company has not performed an analysis to determine whether an ownership change (as defined under Section 382) occurred during this year or preceding year(s). A determination of the potential impact these provisions might have on the utilization of net operating losses will be made when the net operating loss is projected to be utilized. The NOL carryforwards expire at various intervals through 2037, except the NOLs from tax years beginning after December 31, 2017, which have no expiration date. In addition, the Company has R&D credits of $379,000 that will expire at various intervals through 2039.

The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. At this time, the Company does not have any uncertain tax positions to assess.