Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2020

NOTE 15 – INCOME TAXES

The following table presents a reconciliation of the statutory Federal rate and the Company’s effective tax rate for the years ended December 31:

	2020			2019
Change in valuation allowance		19.02	%		12.80	%
Debt instruments		(2.57	)%		3.19	%
Stock based compensation		2.63	%		2.92	%
Accrued compensation		2.80	%		1.03	%
Interest expense		(2.26	)%		0.85	%
Depreciation and amortization		1.37	%		0.16	%
Other		0.00	%		0.04	%
Tax benefit at Federal statutory rate		(21.00	)%		(21.00	)%
Effective tax rate		0.00	%		0.00	%

The effective tax rate for the three and years ended December 31, 2020 and 2019, differs from the statutory rate of 21% for the years ended December 31, 2020 and 2019, respectively, as a result of state taxes (net of Federal benefit), permanent differences, and a reserve against deferred tax assets.

There was not a provision for income taxes for the years ended December 31, 2020 and 2019.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents significant components of the Company’s deferred tax assets and liabilities for the years ended December 31:

	2020			2019
DEFERRED TAX ASSETS, net:
Net operating loss carryforwards	$	12,186,945		$	10,670,455
Accrued compensation		1,341,779			1,211,630
Stock based compensation		175,676			196,809
Credit carryforwards		58,122			58,122
Interest expenses		57,333			57,332
Depreciation and amortization		(155,304	)		(208,482	)
Debt instruments		(14,944	)		(408,144	)
Total		13,649,607			11,577,722
Less valuation allowance		(13,649,607	)		(11,577,722	)
NET DEFERRED TAX ASSETS	$	-		$	-

As of December 31, 2020, the Company had a Federal net operating loss carryforward of $46,286,607. In addition, the Company had a net operating loss carryforward for Hawaii income tax purposes of $36,410,868 as of December 31, 2020.

The Company’s valuation allowance was primarily related to the operating losses. The valuation allowance is determined in accordance with the provisions of ASC No. 740, Income Taxes, which requires an assessment of both negative and positive evidence when measuring the need for a valuation allowance. Based on the available objective evidence and the Company’s history of losses, management provides no assurance that the net deferred tax assets will be realized. As of December 31, 2020 and 2019, the Company has applied a valuation allowance against its deferred tax assets net of the expected income from the reversal of the deferred tax liabilities.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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