Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  



The Company follows ASC 740-10 “Income Taxes” which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.


A reconciliation of tax expense computed at the statutory federal tax rate on loss from operations before income taxes to the actual income tax (benefit) / expense is as follows: 

    2021   2020
Tax benefit computed at the statutory rate   $ (85,028 )   $ (656,723 )
State taxes     (7,398 )     9,489  
Book (income not taxable) expenses not deductible for tax purposes     (385,135 )     540  
Rate change     26,739       (30,914 )
Deferred tax write-off     42,782        
Other     (393 )     10,218  
Total adjustments to tax provision     (408,433 )     (667,390 )
Change in valuation allowance for deferred tax assets     416,322       689,992  
Income tax expense   $ 7,889     $ 22,602  


Deferred income taxes include the net tax effects of net operating loss (NOL) carry forwards and the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets are as follows: 

    2021   2020
Deferred Tax Assets:                
Net operating loss carry forwards   $ 22,078,280     $ 21,641,665  
Intangibles     17,728       117,533  
Other     638,477       558,964  
Total deferred tax assets     22,734,485       22,318,162  
Deferred Tax Liabilities:                
Total deferred tax liabilities            
Valuation allowance     (22,734,485 )     (22,318,162 )
Net deferred tax asset   $     $  


A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets depends on the ability of the Company to generate sufficient taxable income of the appropriate character in the future and in the appropriate taxing jurisdictions. As of December 31, 2021 and December 31, 2020, the Company’s valuation allowance, established for the tax benefit that may not be realized, totaled approximately $22,730,000 and $22,320,000, respectively. The overall increase in the valuation allowance is related to insignificant fluctuations in the temporary differences and federal and state net operating losses.


At December 31, 2021 the Company had net operating loss carryforwards of approximately $98,300,000 and $24,900,000 for federal and state income tax purposes which will expire at various dates from 2022 – 2041. There are approximately $9,100,000 of net operating losses that do not expire.


The Company’s NOL and tax credit carryovers may be significantly limited under Section 382 of the Internal Revenue Code (IRC). NOL and tax credit carryovers are limited under Section 382 when there is a significant “ownership change” as defined in the IRC. During 2005 and in prior years, the Company may have experienced such ownership changes that could have imposed such limitations.


The limitation imposed by Section 382 would place an annual limitation on the amount of NOL and tax credit carryovers that can be utilized. When the Company completes the necessary studies, the amount of NOL carryovers available may be reduced significantly. However, since the valuation allowance fully reserves for all available carryovers, the effect of the reduction would be offset by a reduction in the valuation allowance.


The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The Company is generally no longer subject to U.S. federal income tax examinations by tax authorities for years before 2017 and various states before 2017. Although these years are no longer subject to examination by the Internal Revenue Service (IRS) and various state taxing authorities, net operating loss carryforwards generated in those years may still be adjusted upon examination by the IRS or state taxing authorities if they have been or will be used in a future period.


The Company follows the provisions of uncertain tax positions as addressed in FASB Accounting Standards Codification 740-10-65-1. The Company recognized no change in the liability for unrecognized tax benefits. The Company has no tax positions at December 31, 2021 or 2020 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expense. No such interest or penalties were recognized during the periods presented. The Company had no accruals for interest and penalties at December 31, 2021 or 2020. The Company’s utilization of any net operating loss carryforwards may be unlikely due to its continuing losses.