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9. INCOME TAXES

12 Months Ended

Dec. 31, 2020

The Company accounts for income taxes in accordance with ASC Topic No. 740, “Income Taxes.” This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards.

After applying the provisions of Section 382 of the Internal Revenue Code, the unexpired net operating loss (“NOL”) carry forward at December 31, 2020 was approximately $13.5 million, of which, approximately $5.5 million, generated in 2017 and prior, will expire between 2021 and 2037. Under the Tax Cuts and Jobs Act, the NOL generated in 2018, 2019 and 2020, of approximately $8.0 million, will have an indefinite carryforward period but can generally only be used to offset 80% of taxable income in any particular year. We may be subject to certain limitations in our annual utilization of NOL carry forwards to off-set future taxable income pursuant to Section 382 of the Internal Revenue Code, which could result in NOLs expiring unused.

The non-current deferred tax asset is summarized below:

	2020			2019
Net operating loss carry forwards	$	2,827,835		$	1,876,114
Valuation allowance		(2,827,835	)		(1,876,114	)
Net non-current deferred tax asset	$	-		$	-

A 100% valuation allowance has been provided for all deferred tax assets, as the ability of the Company to generate sufficient taxable income in the future is uncertain.

Reconciliations of the expected federal income tax benefit based on the statutory income tax rate of 21% to the actual benefit for the years ended December 31, 2020 and 2019 are listed below.

	2020			2019
Expected federal income tax benefit	$	914,852		$	605,767
Goodwill amortization		-			65,957
Change in valuation allowance		(1,020,111	)		(294,050	)
NOL carryover adjusted for expiration		111,345			(302,134	)
Pass through entity income allocation		-			(94,151	)
Meals and entertainment		(24,859	)		(29,741	)
Stock-based compensation		(103,657	)		48,352
PPP Loan Forgiveness		122,430			-
Income tax expense (benefit)	$	-		$	-

All tax years starting with 2017 are open for examination.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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