INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 24 – INCOME TAXES

Income tax (benefit) expense from continuing operations for the year ended December 31, 2021 consisted of the following:

	Current		Deferred			Total
Federal	$	—	$	(132,000	)	$	(132,000	)
State		5,000		—			5,000
Subtotal		5,000		(132,000	)		(127,000	)
Valuation allowance		—		—			—
Total	$	5,000	$	(132,000	)	$	(127,000	)

Income tax expense from continuing operations for the year ended December 31, 2020 consisted of the following:

	Current		Deferred		Total
Federal	$	—	$	—
State		21,000		—		21,000
Subtotal		21,000		—		21,000
Valuation allowance		—		—		—
Total	$	21,000	$	—	$	21,000

A reconciliation of the federal statutory income tax rate to the Company’s effective income tax rate is as follows:

	2021			2020
Taxes calculated at federal rate		21.0	%		21.0	%
Stock based compensation		0.0	%		(2.7	)%
Permanent differences		(1.0	)%		(13.4	)%
Change in valuation allowance		(15.1	)%		(2.1	)%
Fair market adjustment derivatives		0.0	%		0.5	%
Prior year true-ups		0.0	%		(3.3	)%
Other adjustments		(4.1	)%		(0.1	)%
Provision for income tax benefit (expense)		0.8	%		(0.1	)%

The tax effects, rounded to thousands, of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, are presented below:

	2021			2020
Deferred Tax Assets
Net operating loss carryforwards	$	10,003,000		$	9,040,000
Bad debt expense		33,000			136,000
Fixed assets		-			9,000
Accrued interest		-			-
Stock based compensation		525,000			567,000
Interest expense limitation carryover		220,000			629,000
Contribution carryover		5,000			5,000
Lease liability		62,000			97,000
Unrealized gain on marketable securities		2,668,000			120,000
Other accruals		124,000			173,000
Total Deferred Tax Assets		13,640,000			10,776,000
Deferred Tax Liabilities
Fixed assets		(29,000	)		-
Right-of-use asset		(66,000	)		(101,000	)
Intangibles		(455,000	)		(690,000	)
Interest expense limitation carryover		(59,000	)		-
Prepaid expenses		(15,000	)		(17,000	)
Total Deferred Tax Liabilities		(624,000	)		(808,000	)
Net Deferred Tax Assets		13,016,000			9,968,000
Valuation Allowance		(13,016,000	)		(9,968,000	)
Net deferred tax / (liabilities)	$	—		$	—

Deferred tax assets and liabilities are computed by applying the federal and state income tax rates in effect to the gross amounts of temporary differences and other tax attributes, such as net operating loss carry-forwards. In assessing if the deferred tax assets will be realized, the Company considers whether it is more likely than not that some or all of these deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which these deductible temporary differences reverse.

During the years ended December 31, 2021 and 2020, the valuation allowance increased by $2,996,000 and $2,375,000, respectively. The increase for both years was attributable to the increase in our net operating loss carryforwards. The total valuation allowance results from the Company’s estimate of its inability to recover its net deferred tax assets.

At December 31, 2021, the Company has federal and state net operating loss carry forwards, which are available to offset future taxable income, of approximately $34,933,000 and $73,733,000 respectively, both of which begin to expire in 2032 and 2032 respectively. These carry forwards may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions if the Company experienced one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company has not completed an IRC Section 382/383 analysis. If a change in ownership were to have occurred, NOL and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.

The Company files income tax returns in the United States and various state jurisdictions. Due to the Company’s net operating loss posture all tax years are open and subject to income tax examination by tax authorities. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. As of December 31, 2021 and 2020, there are no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties.

The Company is in the process of analyzing their NOL and has not determined if the company has had any change of control issues that could limit the future use of NOL. NOL carryforwards that were generated after 2017 of approximately $29.4 million may only be used to offset 80% of taxable income and are carried forward indefinitely.