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Income Taxes | 12 Months Ended
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Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 13 - INCOME TAXES The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities. Deferred tax assets are reduced, if deemed necessary, by a valuation allowance for the amount of tax benefits which are not expected to be realized. The following is a summary of the components giving rise to the income tax provision (benefit) for the years ended December 31: The provision (benefit) for income taxes consists of the following:
|  | 2020 |  |  | 2019 |
Currently payable: |  |  |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | - |
State |  |  | 5,000 |  |  |  | - |
Total currently payable |  |  | 5,000 |  |  |  | - |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 582,000 |  |  |  | (367,000 | )
State |  |  | (22,000 | ) |  |  | (125,000 | )
Foreign |  |  | (125,000 | ) |  |  | (117,000 | )
Total deferred |  |  | 435,000 |  |  |  | (609,000 | )
Less: (decrease) increase in allowance |  |  | (2,214,000 | ) |  |  | 484,000 |
Net deferred |  |  | (1,779,000 | ) |  |  | (125,000 | )
Total income tax benefit |  | $ | (1,774,000 | ) |  | $ | (125,000 | )
Individual components of deferred tax assets and liabilities are as follows:
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |
Net operating loss carry forwards |  | $ | 13,852,000 |  |  | $ | 11,189,000 |
Equity issued for services |  |  | 192,000 |  |  |  | 169,000 |
Goodwill and other intangibles |  |  | 0 |  |  |  | 676,000 |
Investment in pass-through entity |  |  | 12,000 |  |  |  | 12,000 |
Deferred revenue |  |  | 183,000 |  |  |  | 182,000 |
Operating Lease Liability |  |  | 47,000 |  |  |  | 284,000 |
Other |  |  | 605,000 |  |  |  | 376,000 |
Gross deferred tax assets |  |  | 14,891,000 |  |  |  | 12,888,000 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Goodwill and other intangibles |  |  | 4,668,000 |  |  |  | 29,000 |
Unrealized gains |  |  | 2,599,000 |  |  |  | - |
Right -of-use asset |  |  | 47,000 |  |  |  | 284,000 |
Gross deferred tax liabilities |  |  | 7,314,000 |  |  |  | 313,000 |
Less: valuation allowance |  |  | (11,076,000 | ) |  |  | (12,619,000 | )
Net deferred tax liabilities |  | $ | (3,499,000 | ) |  | $ | (44,000 | )
The 2017 Tax Cuts and Jobs Act repeals the corporate alternative minimum tax (AMT) and permits existing minimum tax credits carryovers to offset the regular tax liability for any tax year. Further, the credit is refundable for any tax year beginning after December 31, 2017 and before December 31, 2020 in an amount equal to 50 percent of the excess of the minimum tax credit over regular liability. Any remaining credit will be fully refundable for the year ended December 31, 2021. As of December 31, 2020 and 2019, the Company had $0 and $46,000 respectively of minimum tax credit included in prepaids and other current assets in the accompanying consolidated balance sheet. On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the “Act”). The legislation significantly changed U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax system and imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries. The Act permanently reduced the U.S. corporate income tax rate from a maximum of 35% to a 21% rate, effective January 1, 2018 Pretax losses from the Company’s foreign subsidiaries amounted to $.4 million and $1.5 million for 2020 and 2019, respectively. The balance of pretax earnings or loss for each of those years were domestic. While the Tax Cuts and Jobs Act provides for a territorial tax system, beginning in 2018, it includes the foreign-derived intangible income (“FDII”) and global intangible low-taxed income (“GILTI”) provisions. The Company elected to account for GILTI tax in the period in which it is incurred. The GILTI provisions require the Company to include in its U.S. income tax return foreign subsidiary earnings from its Controlled Foreign Corporations (“CFCs”) in excess of an allowable return on the foreign subsidiary’s tangible assets. The FDII provisions allow for a deduction equal to a percentage of the foreign-derived intangible income of a domestic corporation. As a result of these provisions, the Company did not have any additional tax expense or benefit from either GILTI or FDII. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the economic uncertainty resulting from the COVID-19 pandemic. The CARES Act includes many measures to assist companies, including temporary changes to income and non-income based laws, some of which were enacted as part of the Tax Cuts and Jobs Act of 2017 (“TCJA”). Some of the key changes include eliminating the 80% of taxable income limitation by allowing corporate entities to fully utilize NOLs to offset taxable income in 2018, 2019 and 2020, allowing NOLs originating in 2018, 2019 and 2020 to be carried back five years, enhanced interest deductibility, and retroactively clarifying the immediate recovery of qualified improvement property costs rather than over a 39-year recovery period. During the year ended December 31, 2020, the Company was not able to benefit from these provisions. The Company will continue to monitor additional guidance issued and assess the impact that various provisions will have on its business. At December 31, 2020 and 2019, the Company has approximately $56.7 million and $50.0 million in federal net operating loss carryforwards (“NOLs”), respectively, available to reduce future taxable income. Under the provisions of the Internal Revenue Code, the net operating losses are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Certain tax attributes are subject to an annual limitation as a result of certain cumulative changes in ownership interest of significant shareholders which could constitute a change of ownership as defined under Internal Revenue Code Section 382. The Company has completed a full analysis of historical ownership changes and determined that a portion of the net operating losses have a limitation on future deductibility. Approximately $43.8 million of net operating losses incurred prior to 2020 will be unable to offset future taxable income and have been reserved via a valuation allowance to reduce the deferred tax asset to the expected realizable amount, leaving $2.9M available for use which expire at various dates through 2038 and the residual which never expire. Additionally, at December 31, 2020 and 2019, the Company had approximately $6.9 million and $5.5 million, and $2.2 million and $1.4 million, of California and Illinois NOL carry-forwards, respectively, which expire through 2039. The NOL carry-forwards may be limited in certain circumstances, including ownership change and have been fully reserved via a valuation allowance. The valuation allowance for deferred tax assets decreased approximately $1,543,000 (net of $671,000 acquired with Impact BioMedical) in the year ended December 31, 2020 and increased by approximately $484,000 in the year ended December 31, 2019. The decrease in the current year valuation allowance and subsequent increase in the deferred tax liability is driven by several factors and is represented in the below table:
Balance at December 31, 2019 |  | $ | 44,000 |
Add: | Acquisition of Impact BioMedical |  |  | 5,234,000 |
| Current year activity |  |  | 435,000 |
Less: |  |  |  |  |
| Release of valuation allowance |  |  | 2,214,000 |
Balance at December 31, 2020 |  | $ | 3,499,000 |
The differences between the United States statutory federal income tax rate and the effective income tax rate in the accompanying consolidated statements of operations are as follows:
|  | 2020 |  |  | 2019 |
Statutory United States federal rate |  |  | 21.0 | % |  |  | 21.00 | %
State income taxes net of federal benefit |  |  | (9.3 | )% |  |  | 3.3 | %
Permanent differences |  |  | 2.0 | % |  |  | (1.6 | )%
Other |  |  | (8.3 | )% |  |  | (1.3 | )%
Non-controlling interest |  |  | (70.5 | )% |  |  | - | %
Foreign taxes |  |  | 7.3 | % |  |  | (1.1 | )%
PPP loan forgiveness |  |  | (142.2 | )% |  |  | - | %
Stock based compensation |  |  | 22.4 | % |  |  | -% |
Executive compensation |  |  | 485.2 | % |  |  |  |
Change in valuation allowance |  |  | (1547.5 | )% |  |  | (16.3 | )%
Effective rate |  |  | (1,239.9 | )% |  |  | 4.00 | %
The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2020 and 2019, the Company recognized no interest and penalties. The Company files income tax returns in the U.S. federal jurisdiction and various states. The tax years 2017-2020 generally remain open to examination by major taxing jurisdictions to which the Company is subject.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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