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 13 – Income Taxes

 

The Company and its subsidiaries files income tax returns in the United States (federal and California) and Germany.

 

The U.S. and foreign components of loss before income taxes from continuing operations were as follows:

 

    For the Years Ended  
    December 31,  
    2020     2019  
United States   $ (45,315,394 )   $ (15,173,062 )
Foreign     (468,944 )     (282,265 )
Loss before income taxes from continuing operations   $ (45,784,338 )   $ (15,455,327 )

 

The income tax provision (benefit) for the years ended December 31, 2020 and 2019 consists of the following:

 

    For the Years Ended  
    December 31,  
    2020     2019  
Federal            
   Current   $
-
    $
-
 
Deferred     (7,159,062 )     (7,527,844 )
State and local:                
Current    
-
     
-
 
Deferred     (681,815 )     (716,938 )
Foreign                
Current    
-
     
-
 
Deferred     (63,193 )    
-
 
      (7,904,070 )     (8,244,782 )
Change in valuation allowance     7,904,070       8,244,782  
Income tax provision (benefit)   $
-
    $
-
 

 

The reconciliation of the expected tax expense (benefit) based on the U.S. federal statutory rates for 2020 and 2019, respectively, with the actual expense is as follows:

 

    For the Years Ended  
    December 31,  
    2020     2019  
U.S. Federal statutory rate     21.0 %     21.0 %
State taxes, net of federal benefit     6.3 %     2.0 %
Permanent differences     (10.7 %)     (0.2 %)
Statutory rate differential - domestic v. foreign     (0.1 %)     (0.2 %)
Changes in tax rates     1.0 %     0.0 %
Other     0.4 %     1.1 %
Adjustments in deferred taxes     (0.9 %)     29.6 %
Change in valuation allowance     (17.0 %)     (53.3 %)
Total     0.0 %     0.0 %

  

The tax effects of temporary differences that give rise to deferred tax assets are presented below:

 

    As of
December 31,
 
    2020     2019  
Deferred Tax Assets:            
Net operating loss carryforwards   $ 13,022,657     $ 8,936,688  
Production costs     274,355       231,217  
Investment     2,909,497       2,190,138  
Stock-based compensation     387,410       56,976  
Capitalized start-up costs     322,793       353,651  
Property and equipment     1,022,026      
-
 
Accruals and other     1,252,731       547,735  
Gross deferred tax assets     19,191,469       12,316,404  
Property and equipment    
 
      (1,029,005 )
Net deferred tax assets     19,191,469       11,287,399  
Valuation allowance     (19,191,469 )     (11,287,399 )
Deferred tax assets, net of valuation allowance   $
-
    $
-
 

  

As of December 31, 2020, the Company had approximately $55,040,000, $14,204,525 and $4,234,582 of federal, state and foreign net operating loss (“NOL”) carryforwards available to offset against future taxable income. The federal NOL may be carried forward indefinitely. For state, these NOLs will begin to expire in 2038. For the foreign NOLs, these NOLs can be carried forward indefinitely. The federal and state NOL carryovers are subject to annual limitations under Section 382 of the U.S. Internal Revenue Code when there is a greater than 50% ownership change, as determined under the regulations. The Company is not aware of any annual limitations have been triggered. The Company remains subject to the possibility that a future greater than 50% ownership change could trigger annual limitations on the usage of NOLs.

 

The Company assesses the likelihood that deferred tax assets will be realized. ASC 740, “Income Taxes” 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. A review of all available positive and negative evidence needs to be considered, including the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies. After consideration of all the information available, 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 December 31, 2020 and 2019.

 

The Company’s tax returns remain subject to examination by various taxing authorities beginning with the tax year ended December 31, 2016. No tax audits were commenced or were in process during the years ended December 31, 2020 and 2019.

 

The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The Company recognizes liabilities for uncertain tax positions based on a two-step process. To the extent a tax position does not meet a more-likely-than-not level of certainty, no benefit is recognized in the financial statements. If a position meets the more-likely-than-not level of certainty, it is recognized in the consolidated financial statements at the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company has not recognized any liability related to uncertain tax provisions as of December 31, 2020 and December 31, 2019.

 

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. The Company had no accrual for interest or penalties at December 31, 2020 and December 31, 2019, respectively, and has not recognized interest and/or penalties during the years then ended as there are no material unrecognized tax benefits. Management does not anticipate any material changes to the amount of unrecognized tax benefits within in the next 12 months.

 

The Company intends to indefinitely reinvest its unremitted earnings in its foreign subsidiaries, and accordingly has not provided deferred tax liabilities on those earnings. The Company has not determined at this time an estimate of total amount of unremitted earnings, as it is not practical at this time.