Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.21.1
Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
INCOME TAXES

Note 9 - Income Taxes


The tax effects of temporary differences that give rise to deferred tax assets are as follows:


    As of December 31,  
    2020     2019  
Current:            
Accrued expenses   $ 464,042     $ 223,712  
                 
Stock compensation     869,815       838,753  
                 
Net operating loss carryforward     16,165,927       11,978,595  
                 
Research and development credit carry forward     548,983       367,261  
                 
  Total deferred tax assets     18,048,767       13,408,321  
                 
Valuation allowance     (18,048,767 )     (13,408,321 )
                 
Deferred tax asset, net of valuation allowance   $ -     $ -  

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


    For the Years Ended
December 31,		  
    2020     2019  
U.S. statutory federal rate     (21.0 )%     (21.0 )%
State income taxes, net of federal tax     (7.0 )%     (7.0 )%
Federal tax rate change     - %     - %
Permanent differences     0.4 %     3.0 %
Prior year true-ups     (0.4 )%     0.3 %
R&D tax credit     (0.5 )%     (0.7 )%
Change in valuation allowance     28.5 %     25.4 %
Income tax provision (benefit)     - %     - %

The income tax provision consists of the following:


    For the Years Ended
December 31,		  
    2020     2019  
Federal            
Current   $ -     $ -  
Deferred     (3,482,375 )     (2,378,218 )
State and local                
Current     -       -  
Deferred     (1,158,072 )     (790,882 )
Change in valuation allowance     4,640,447       3,169,100  
Income tax provision (benefit)   $ -     $ -  

The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not more-likely-than-not, a valuation allowance is established. Based upon the Company’s losses since inception, management believes that it is more-likely-than-not that future benefits of deferred tax assets will not be realized. Therefore, the Company established a full valuation allowance as of December 31, 2020 and 2019. As of December 31, 2020 and 2019, the change in valuation allowance was $4,640,447 and $3,169,100, respectively. 


The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, principally California and New Jersey. The Company is subject to examination by the various taxing authorities. The Company’s federal and state income tax returns for tax years beginning in 2015 remain subject to examination.


At December 31, 2020 and 2019, the Company had approximately $58,000,000 and $43,000,000, respectively, of federal and state net operating loss carryovers that may be available to offset future taxable income. The Company’s 2017 and prior federal and state net operating loss carry forwards, if not utilized, will begin to expire from 2029 to 2037. Beginning with 2018, and for subsequent years, the Company’s NOLs will have indefinite lives for federal tax purposes. In addition, net operating losses arising from prior years are also subject to examination at the time they are utilized in future years. In accordance with Section 382 of the Internal Revenue Code, the usage of the Company’s net operating loss carryforward could be limited in the event of a change in ownership. At this time, the Company has not completed a full study to assess whether an ownership change under Section 382 of the Code occurred due to the costs and complexities associated with such a study.


At December 31, 2020 and 2019, the Company had approximately $549,000 and $367,000, respectively, in gross R&D tax credits. These R&D tax credits will begin to expire from 2033 to 2040, respectively.