Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 11 – INCOME TAXES

The effective tax rate was 1.9% and 0.9% for the years ended December 31, 2022 and 2021, respectively. The effective tax rate differs from the federal tax rate of 21% for the year ended December 31, 2022 and 2021 due primarily to the full valuation allowance and other discrete items.

Reconciliation between the effective tax rate on loss before provision for income taxes and the statutory tax rate is as follows:

 

​

 

12/31/2022

 

Income tax expense (benefit) at federal statutory rate

 

 

21.0

%

State taxes

 

 

0.2

%

Change in valuation allowance

 

 

(20.4

)%

Change in deferred tax liability

 

 

1.9

%

Permanent differences

 

 

(1.4

)%

Other - net

 

 

0.6

%

Income tax expense (benefit)

 

 

1.9

%

 

​

 

12/31/2021

 

Income tax expense (benefit) at federal statutory rate

 

 

21.0

%

Change in valuation allowance

 

 

(20.1

)%

Return to provision adjustments

 

 

(0.5

)%

Permanent differences

 

 

0.5

%

Other - net

 

 

(0.0

)%

Income tax expense (benefit)

 

 

0.9

%

 

At December 31, 2022 and 2021, the Company had federal and state net operating losses (“NOLs”) in the amount of $29,547,000 and $26,649,000 respectively. While the federal NOLs do not expire, the Tax Cuts & Jobs Act of 2017 limits the amount of federal net operating loss utilized each year after December 31, 2020 to 80% of taxable income. The state NOLs start expiring in 2031.

 

Table of Contents

​

NOTE 11 – INCOME TAXES (CONTINUED)

 

Temporary differences which give rise to a significant portion of deferred tax assets are as follows at:

​

​

 

December 31, 2022

 

 

December 31, 2021

 

Deferred income tax assets (liabilities):

 

 

 

 

​

 

Startup costs

 

$

1,035,317

 

 

$

1,001,272

 

Stock compensation - RSAs

 

 

875,498

 

 

 

584,881

 

Net operating loss - Federal

 

 

6,204,900

 

 

 

2,244,367

 

Net operating loss - State

 

 

1,264,598

 

 

 

522,491

 

Accrued expenses

 

 

-

 

 

 

174,289

 

Amortization

 

 

(1,217,409

)

 

 

(1,682,939

)

Depreciation

 

 

(262,179

)

 

 

(333,501

)

Operating lease assets

 

 

(813,972

)

 

 

(393,985

)

Operating lease liabilities

 

 

1,370,631

 

 

 

350,236

 

Deferred revenue

 

 

45,388

 

 

 

—

 

​

 

 

8,502,772

 

 

 

2,467,111

 

Less: Valuation allowance

 

 

(9,982,652

)

 

 

(4,468,123

)

Deferred tax liabilities, net

 

$

(1,479,880

)

 

$

(2,001,012

)

 

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. On the basis of this evaluation, as of December 31, 2022, a valuation allowance of $9,982,652 has been recorded to recognize the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

The Company and its subsidiaries income tax returns for 2019, 2020 and 2021 are open to review by the tax authorities.​

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act") that includes, among other provisions, changes to the U.S. corporate income tax system, including a fifteen percent minimum tax based on "adjusted financial statement income,” and a one percent excise tax on net repurchases of stock after December 31, 2022. The Company is continuing to evaluate the Inflation Reduction Act and its requirements, as well as the application to its business.