Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.22.2.2
Income Taxes
6 Months Ended
Jun. 30, 2022
Income Taxes [Abstract]  
INCOME TAXES

NOTE 15 – INCOME TAXES

 

The Company accounts for income taxes in accordance with standards of disclosure propounded by the FASB, and any related interpretations of those standards sanctioned by the FASB. Accordingly, deferred tax assets and liabilities are determined based on differences between the consolidated financial statement and tax bases of assets and liabilities, as well as a consideration of net operating loss and credit carry forwards, using enacted tax rates in effect for the period in which the differences are expected to impact taxable income. A valuation allowance is established, when necessary, to reduce deferred tax assets to the amount that is more likely than not to be realized. Due to the uncertainty as to the utilization of net operating loss carry forwards, a valuation allowance has been made to the extent of any tax benefit that net operating losses may generate.

 

At the date the financial statements were available to be issued, the federal and state income tax returns for the year ended December 31, 2021 have not been filed by the company.

 

As of December 31, 2020, the Company has federal and state net operating loss carryforward of approximately $93.0 million and $57.8 million available to reduce future taxable income, if any, for Federal and state income tax purposes. The Company experienced a Section 382 change of ownership in connection with the merger in 2021, thereby subjecting net operating loss carryovers generated previously to limitations on utilization. To-date, these limitations have not had an impact on the Company’s reported income tax.

 

The Company’s deferred tax asset and valuation allowance at December 31, 2021:

 

Schedule of Deferred Tax Assets      
       
As of December 31, 2021      
       
NOL at 12/31/20     (93,056,108 )
         
Net income year ended December 31, 2021     (9,465,033 )
         
Loss on debt modification     2,385,204  
Interest Expense - Debt Discount     1,511,049  
Interest Expense     706,126  
Other accrued expenses - CY     547,642  
Stock Compensation - Options     139,515  
Accrued Vacation – CY     35,152  
Compensation – RSU     21,077  
Change in fair value of derivative liability     (15,282 )
Change in fair value of warrant liability     (438,972 )
         
NOL at 12/31/21     (97,629,630 )
         
Effective rate     21 %
         
Deferred tax asset     (20,502,222 )
Valuation allowance     20,502,222  
         
Net deferred tax asset at 12/31/21    
-
 

 

The ultimate realization of our deferred tax asset is dependent, in part, upon the tax laws in effect, our future earnings, and other events.  As of and December 31, 2021 and 2020, we recorded a 100% allowance against our deferred tax asset since we were unable to conclude that it is more likely than not that our deferred tax asset will be realized.

 

The company’s major tax jurisdictions are the United States and California. All of the Company’s tax years will remain open three and four years for examination by the Federal and state tax authorities, respectively, from the date of utilization of the net operating loss. As of December 31, 2021, the tax years beginning after 2018 and 2017 remain subject to examination by US Federal and Californian authorities. However, net operating losses carried forward are subject to examination in the tax year utilized.