Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.22.1
INCOME TAXES
12 Months Ended
Dec. 31, 2021
INCOME TAXES  
INCOME TAXES

NOTE 6 — INCOME TAXES

The provision for income taxes consists of the following provisions/(benefits):

    

For the Years Ended

December 31,

    

2021

    

2020

Deferred tax benefit:

  

 

  

Federal

$

(2,183,635)

$

(132,480)

State and local

 

(978,739)

 

(641,793)

 

(3,162,374)

 

(774,273)

Change in valuation allowance

 

3,162,374

 

774,273

Provision for income taxes

$

$

The provision for income taxes differs from the statutory federal income tax rates as follows:

    

For the Years Ended

 

 December 31,

    

2021

    

2020

 

Tax expense at the federal statutory rate

21.0

%  

21.0

%

State taxes, net of federal benefit

8.7

%  

3.5

%

Permanent differences

(0.2)

%  

(10.3)

%

True-up

1.2

%  

(4.4)

%

Change in valuation allowance

(30.7)

%  

(9.8)

%

Effective income tax rate

0.0

%  

0.0

%

The components of deferred tax assets as of December 31, 2021 and 2020 relate to temporary differences and carryforwards as follows:

    

December 31,

    

2021

    

2020

Net operating loss carryforwards

$

5,383,659

$

2,702,003

Stock-based compensation expense

 

169,427

 

102,409

Deferred Revenue

7,972

Accrued Legal Settlement

290,948

Other reserve

 

59,682

 

55,699

Intangibles

 

211,651

 

68,733

Tax credits

 

90,952

 

90,952

Deferred tax assets

 

6,214,291

 

3,019,796

Fixed assets

 

(36,902)

 

(4,781)

Deferred tax liabilities

 

(36,902)

 

(4,781)

Valuation allowance

 

(6,177,389)

 

(3,015,015)

Deferred tax assets, net

$

$

As of December 31, 2021, the Company had approximately $18,263,000 of federal net operating loss (“NOL”) carryforwards that may be available to offset future taxable income. As of that date, approximately $533,000 of federal net operating losses will expire in 2037 and approximately $17,730,000 have no expiration. In addition, the Company has approximately $91,000 of federal research and development credit carryforwards that begin to expire in 2037. The Company also had approximately $29,016,000 of state and local NOLs that begin to expire in 2037. The utilization of NOL carryforwards and research and development credits to offset future taxable income may be subject to limitations under Section 382 of the Internal Revenue Code and similar state statutes as a result of ownership changes that could occur in the future. If necessary, the deferred tax assets will be reduced by any carryforward that expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.

The Company has assessed the likelihood that deferred tax assets will be realized in accordance with the provisions of ASC 740, Income Taxes (“ASC 740”). ASC 740 requires that such a review considers all available positive and negative evidence, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. ASC 740 requires that a valuation allowance be established when it is “more likely than not” that all, or a portion of, deferred tax assets will not be realized. After the performance of such reviews as of December 31, 2021 and 2020, management believes that uncertainty exists with respect to future realization of its deferred tax assets and has, therefore, established a full valuation allowance as of those dates. Thus, the Company increased the valuation allowance by $3,162,374 and $774,273 during the years ended December 31, 2021 and 2020, respectively.

Management has evaluated and concluded that there were no material uncertain tax positions requiring recognition in the Company’s consolidated financial statements as of December 31, 2021 and 2020. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date.

The Company is subject to income taxes in the United States and in various state taxing jurisdictions including New York, New York City and California. No tax audits were commenced or were in process during the years ended December 31, 2021 and 2020. No tax related interest or penalties were incurred during the years ended December 31, 2021 and 2020. The Company’s Federal, New York State and City, and State of California income tax returns filed since inception remain subject to examination.