Note 12 – Income Taxes

Deferred income taxes reflect the net 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 Company’s deferred tax assets relate primarily to its net operating loss carryforwards and other balance sheet basis differences. In accordance with ASC 740, “Income Taxes,” the Company recorded a valuation allowance to fully offset the gross deferred tax asset, because it is not more likely than not that the Company will realize future benefits associated with these deferred tax assets at December 31, 2021 and 2020.

As of December 31, 2021 and 2020, the Company had deferred tax assets of approximately $27,200 and $22,300, respectively, against which a full valuation allowance of $27,200 and $22,300, respectively had been recorded. The change in the valuation allowance for the year ended December 31, 2021 was an increase of $4,900. The increase in the valuation allowance for the year ended December 31, 2021 was mainly attributable to increases in net operating losses and non-deductible share-based compensation, which resulted in an increase in the deferred tax assets with a corresponding valuation allowance. Significant components of the Company’s deferred tax assets at December 31, 2021 and 2020 were as follows:

 Schedule of Deferred Tax Assets

A reconciliation of the federal statutory tax rate and the effective tax rates for the years ended December 31, 2021 and 2020 is as follows:

 Schedule of Effective Income Tax Rate Reconciliation

The Company had approximately $119,600 and $91,000 of gross net operating loss (“NOL”) carryforwards (federal, state and Israel) as of December 31, 2021 and 2020, respectively. Sections 382 and 383 of the Internal Revenue Code, and similar state regulations, contain provisions that may limit the NOL carryforwards available to be used to offset income in any given year upon the occurrence of certain events, including changes in the ownership interests of significant stockholders. In the event of a cumulative change in ownership in excess of 50% over a three-year period, the amount of the NOL carryforwards that the Company may utilize in any one year may be limited.

A reconciliation of the Company’s NOLs for the years ended December 31, 2021 and 2020 is as follows:

 Schedule of Reconciliation NOLs

The Company’s federal and state NOLs of $3,300 and $17,000, respectively, begin to expire after 2036 through 2041. The Company’s federal NOL of $15,100, generated since 2018, and the Israel NOL of $84,100 do not expire. A check the box election for Israel was made and accepted by the IRS as of January 1, 2019. As such, approximately $27,700 of Israeli NOLs are available for use in the U.S and have an indefinite life.

The Company follows guidance on accounting for uncertainty in income taxes which prescribes a minimum threshold a tax position is required to meet before being recognized in the financial statements. The Company does not have any liabilities as of December 31, 2021 and 2020 to account for potential income tax exposure. The Company is obligated to file income tax returns in the U.S. federal jurisdiction, several U.S. States and Israel. Since the Company had losses in the past, all prior years that generated net operating loss carry-forwards are open and subject to audit examination in relation to the net operating loss generated from those years. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, was enacted in the United States, the impact of which was not material.