NOTE 11 – INCOME TAXES

The recognized deferred tax asset is based upon the expected utilization of its benefit from future taxable income. The Company has federal net operating loss (“NOL”) carryforwards of approximately $5,800,000 as of December 31, 2020, which is subject to limitations under Section 382 of the Internal Revenue Code. These carryforward losses are available to offset future taxable income and begin to expire in the year 2024 to 2033.

The foregoing amounts are management’s estimates and the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually obtaining and fulfilling new profitable sales agreements and modifying products. The inability to obtain new profitable contracts could reduce estimates of future profitability, which could affect the Company’s ability to realize the deferred tax assets. Significant components of the Company’s deferred tax assets and liabilities are summarized as follows:

	December 31,			December 31,
	2020			2019
Deferred tax assets:
Net operating loss carry forwards	$	1,431,000		$	1,517,482
Long lived assets		117,000			181,000
Share based payments		6,000			13,000
Allowance for doubtful accounts		107,000			109,000
Other		13,084			15,000
Deferred tax asset		1,674,084			1,835,482

Deferred tax liabilities:
Installment sale		-			(346,000	)
Long lived assets		(173,000	)		(278,000	)
Deferred tax liabilities		(173,000	)		(624,000	)
Net deferred tax asset		1,501,084			1,211,482
Less: Valuation allowance		(462,000	)		(337,000	)
Net deferred tax asset	$	1,039,084			874,482

For the year ended December 31, 2020, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to 50% of meals, 100% entertainment expense which are not tax deductible. The total tax provision for the year ended December 31, 2020 was $47,391.

For the year ended December 31, 2019, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to change in federal statutory rate described above and Incentive Stock Options (ISO) and 50% of meals, 100% entertainment expense which are not tax deductible. The total tax benefit for the year ended December 31, 2019 was $455,006.

A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2020 and 2019:

	December 31,			December 31,
	2020			2019
Federal income tax rate		21	%		21	%
State income tax, net of federal benefit		7	%		6	%
Permanent items		3	%		-	%
Return to provision for prior year		(7	%)		-	%
Other		(3	%)		(3	%)
Effective income tax rate		21	%		24	%

Income tax provision (benefit) from continuing operations:

	Year Ended
	December 31,			December 31,
	2020			2019
Current:
Federal	$	136,083		$	-
State and local		75,910			-

Total current tax provision (benefit)		211,993			-

Deferred:
Federal		(115,221	)		(342,006	)
State and local		(49,381	)		(113,000	)

Total deferred tax provision (benefit)		(164,602	)		(455,006	)

Total provision (benefit)	$	47,391			(455,006	)