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Taxes on Income
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
TAXES ON INCOME
NOTE 14:- TAXES ON INCOME

 

Income/(loss) before income taxes consisted of income from domestic operations of ($45.8) million for the calendar year ended December 31, 2021. Income tax expense (benefit) included in the statements of income and comprehensive income consisted of the following.

 

   December 31, 
   2021   2020 
Current        
Federal  $
-
   $
-
 
Foreign   (277,717)   
-
 
State   
-
    
-
 
           
Deferred          
Federal   
-
    
-
 
 Foreign   
-
    
-
 
State   
-
    
-
 
Total  $(277,717)  $
-
 

  

Income tax expense differed from the amount computed by applying the Federal statutory income tax rate of 21% to pretax income/(loss) for fiscal year 2021 as a result of the following:

 

   December 31, 2021 
   Amount   Rate 
Federal tax at statutory rate        
State income taxes, net of federal tax benefit  $(9,627,366)   21.00%
Foreign Taxes   
-
    0.00%
Stock Option Compensation   74,132    0.00%
R&D Credit   
-
    0.00%
Change in Valuation Allowance   9,273,396    0.00%
Tax Return to Tax Provision Adjustment   
-
    (21.0%)
Non-Controlling Interest   
-
    0.00%
Other   2,121    0.00%
Total  $(277,717)   0.00%

 

The tax effects of temporary differences that gave rise to significant portions of the Company’s deferred tax assets and liabilities related to the following:

 

   December 31, 
   2021   2020 
Assets        
Net operating loss carryforwards  $6,244,902    3,261,270 
Operating Lease Liability   911,463    
-
 
Accrued Liabilities   88,833    
-
 
Unrealized Loss   714,428    
-
 
Research and Development Credits   
-
    
-
 
Stock based compensation   4,710,358    
-
 
Disallowed Interest Expense   425,302    
-
 
Amortization   
-
    
-
 
Other   32,853    
-
 
Total deferred tax assets   13,128,139    3,261,270 
           
Liabilities          
Right of Use Asset   934,086    
-
 
Depreciation   (13,311)   
-
 
Other   
-
    249,361 
Total deferred tax liabilities   920,775    249,361 
           
Valuation allowance   (12,207,364)   (3,011,909)
Net deferred tax assets   
-
    
-
 

 

Management believes that, based on available evidence, both positive and negative, it is more likely than not that the deferred tax assets will not be utilized. The valuation allowance increased by $9.2 million for the year ended December 31, 2021 primarily as a result of current year activities.

 

As of December 31, 2021, the Company had approximately $14.4 million and $10.7 million of federal and Australian net operating losses (NOL), that will have an indefinite life carryforward. The Internal Revenue Code (“IRC”) limits the amount of NOL carryforwards that a company may use in a given year in the event of certain cumulative changes in ownership over a three-year period as described in Section 382 of the IRC. Utilization of NOL carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization.

 

If recognized, all of the unrecognized tax benefits would not impact the effective tax rate due to the valuation allowance against certain deferred tax assets. As of December 31, 2021, the Company had no unrecognized income tax benefits. The Company does not anticipate any significant increases or decreases to unrecognized tax benefit during the next twelve months. The Company’s policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense. The Company had no interest or penalty accruals associated with uncertain tax benefits in its consolidated balance sheet and consolidated statement of operations for the tax year ended December 31, 2021.

 

The Company files income tax returns in the U.S. Federal and foreign jurisdictions. As of yet, the company does not have much of a state footprint and does not have any state filings for the tax year ending December 31, 2021. The Company is not currently under examination by income tax authorities in federal or state jurisdictions. All tax returns will remain open for examination by the federal and most state taxing authorities for three years and four years, respectively, from the date of utilization of any net operating loss carryforwards or research and development credits.

 

The Company has made no provision for U.S. income taxes on cumulative undistributed non-U.S. earnings that are indefinitely reinvested at December 31, 2021 . Determination of the potential amount of unrecognized deferred U.S. income tax liability related to such reinvested non-U.S. earnings is not practicable because of the numerous assumptions associated with this hypothetical calculation. However, foreign tax credits would be available to reduce some portion of this amount. Changes to the Company’s policy of reinvestment or repatriation of non-U.S. earnings may have a significant effect on its financial condition and results of operations.