Income Taxes
 12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 14 – INCOME TAXES

 

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2019 and 2018 are presented below:

 

    For the Years Ended  
    December 31,  
    2019     2018  
Deferred tax assets:                
Net operating loss carryforwards   $ 4,599,898     $ 3,328,192  
Receivable allowance     21,000       30,800  
Stock-based compensation     267,226       244,157  
Accruals     48,502       44,816  
Intangible assets     469,169       527,235  
Property and equipment     2,858       -  
Deferred revenues     358,646       166,025  
Gross deferred tax asset     5,767,299       4,341,225  
                 
Deferred tax liabilities:                
Beneficial conversion feature     (10,897 )     (352,111  
Deferred Rent     (260 )     (5,798  
                 
Gross deferred tax liabilities     (11,157 )     (357,909 ) 
                 
Net deferred tax assets     5,756,142       3,983,316  
                 
Valuation allowance     (5,756,142 )     (3,983,316 )
                 
Net deferred tax assets, net of valuation allowance   $ -     $ -  

 

The income tax (provision) benefit for the periods shown consist of the following:

 

    For the Years Ended  
    December 31,  
    2019     2018  
Federal:                
Current   $ -     $ -  
Deferred     1,329,620       606,915  
State and local:                
Current     -       -  
Deferred     443,206       202,305  
      1,772,826       809,220  
Change in valuation allowance     (1,772,826 )     (809,220 )
Income tax (provision) benefit   $ -     $ -  

 

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the periods shown, are as follows:

 

    For the Years Ended  
    December 31,  
    2019     2018  
             
Federal income tax benefit at statutory rate     21.0 %     21.0 %
State income tax benefit, net of federal impact     7.0 %     7.0 %
Permanent differences     (20.6 )%     (0.6 )%
Income passed through to non-controlling interests     (0.0 )%     (0.0 )%
Change in effective rate     (0.4 )%     (3.0 )%
Other     (0.8 )%     (0.1 )%
Change in valuation allowance     (6.2 )%     (24.3 )%
                 
Effective income tax rate     0.0 %     0.0 )%

 

At December 31, 2019 and 2018, the Company had approximately $16.4 million and $11.9 million, respectively, each of federal and state net operating losses (“NOLS”) which may be available to offset future taxable income. The net operating loss carryforwards, if not utilized, will expire from 2030 to 2037 for federal purposes. In accordance with Section 382 of the Internal Revenue Code, the utilization of the Company’s net operating loss carryforwards could be subject to annual limitations if there has been greater than 50% ownership change. As such, the Company has tracked its ownership changes in accordance with Section 382 and has determined that the Company’s net operating loss carryforwards are subject to annual limitations due to a greater than 50% ownership change which occurred during the year ended December 31, 2019. The Section 382 limitation will be approximately $500,000 a year. Based on this limitation, none of the prior year NOLS are expected to expire before being utilized, therefore, no reduction in the NOL carryforward is required.

 

The Company has filed income tax returns in the U.S. federal jurisdiction and the states of California, New Jersey, Texas and New York. The Company’s tax return filed for 2018, 2017, 2016 and 2015 remains subject to examination.

 

The Company is in the process of filing its amended U.S. Federal and State tax returns for the years ended December 31, 2018, 2017 and 2016. The NOLS for the years will not be available until the returns are filed. Assuming these returns are filed, as of December 31, 2019 the company had approximately $11.9 million of Federal and State NOLS that may be available to offset future taxable income.