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INCOME TAXES
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
INCOME TAXES

 

13. INCOME TAXES

 

There was no Federal income tax expense for the years ended December 31, 2021 and 2020 due to the Company’s net losses. Income tax expense represents minimum state taxes due.

 

The blended Federal and State tax rate of 28.04% applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 21% to loss before taxes), as follows:

          
   Year ended December 31,
   2021  2020
Computed “expected” tax expense (benefit)  $(1,384,995)  $(1,093,697)
State taxes, net of federal benefit   (568,269)   (407,798)
Non-deductible stock options   (328,295)   (6,933)
Non-deductible items   1,831    611 
True-up to tax return   (41,173)   683,476 
Change in deferred tax asset valuation allowance   2,321,726    829,285 
Income tax expense  $825   $4,944 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities are as follows:

          
   2021  2020
Deferred tax assets:          
Stock options  $406,703   $574,365 
Deferred Revenue   71,155    31,070 
Other   63,473    86,457 
Net operating loss carryforward   12,484,444    10,012,021 
Total gross deferred tax assets   13,055,775    10,703,913 
Less: Deferred tax asset valuation allowance   (12,978,187)   (10,656,461)
Total net deferred tax assets   77,588    47,452 
Patents   (24,393)     
Deferred tax liabilities:          
Depreciation   (53,195)   (47,452)
Total deferred tax liabilities   (77,588)   (47,452)
Total net deferred taxes  $–   $– 

 

As a result of the Company’s history of incurring operating losses, a full valuation allowance has been established. The valuation allowance at December 31, 2021 was $12,978,187. The increase in the valuation allowance during 2021 was $2,321,726.

 

At December 31, 2021, the Company has a net operating loss carry forward of $45,229,370, of which $25,107,807 is available to offset future net income through 2037. The net operating loss (“NOL”) expires during the years 2027 to 2037 and $20,121,563 may be carried forward indefinitely and limited to offsetting 80% of taxable income. The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred.

 

No liability related to uncertain tax positions is recorded on the financial statements related to uncertain tax positions. There are no unrecognized tax benefits as of December 31, 2021. The Company does not expect that uncertain tax benefits will materially change in the next 12 months.

 

The Company files U.S. federal, California, New York, and Wisconsin State tax returns, and a New York City tax return. All tax returns will remain open for examination by the federal and state taxing authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards.