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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 13 – INCOME TAXES

 

The Company accounts for income taxes in accordance with ASC Topic No. 740, Income Taxes. This standard requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards.

 

As discussed in Notes 3 and 4, the Company recognized net deferred tax liabilities associated with the Precision Healing merger and the Scendia acquisition. As of the dates of these acquisitions, prior to consideration of these acquired deferred tax liabilities, the Company had net deferred tax assets in excess of the deferred tax liabilities being recognized, however, a 100% valuation allowance had previously been provided against the Company’s net deferred tax assets. As a result of the recording of the net deferred tax liabilities related to the Precision Healing merger and Scendia acquisition, the Company reviewed the valuation allowance and determined that it should be reduced by the amount of the deferred tax liabilities that were recognized. This resulted in a year-to-date income tax benefit of $5.8 million for the year ending December 31, 2022.

 

After applying the provisions of Section 382 of the Internal Revenue Code, the unexpired net operating loss (“NOL”) carryforward at December 31, 2023 was approximately $55.7 million, of which, approximately $27.0 million, generated in 2017 and prior, will expire between 2024 and 2037. Under the Tax Cuts and Jobs Act, the NOL generated from 2018 through 2023, of approximately $28.7 million, will have an indefinite carryforward period but can generally only be used to offset 80% of taxable income in any particular year. The Company may be subject to certain limitations in its annual utilization of NOL carry forwards to off-set future taxable income pursuant to Section 382 of the Internal Revenue Code, which could result in NOLs expiring unused.

 

The components of the deferred income tax assets and liabilities consisted of the following:

 

   2023   2022 
   As of December 31, 
   2023   2022 
Deferred tax assets          
Net operating loss carry forwards  $12,467,570   $6,818,547 
Research and development costs   2,119,193    707,076 
Stock compensation expense   711,598    232,250 
Accrued expenses   528,148    - 
Lease liability   512,668    - 
Contingent liability   221,028    - 
Acquisition liability   176,629    - 
Bad debt and other reserves   129,924    92,286 
Inventory reserves   109,176    43,678 
Other temporary differences   203,340    26,102 
Total deferred tax assets   17,179,274    7,919,939 
Deferred tax liabilities          
Depreciation and amortization   (6,180,688)   (5,919,626)
Right of Use assets   (487,402)   - 
Accrued expenses   (424,423)   (26,903)
Contingent liability   (130,802)   - 
Other temporary differences   (166,712)   - 
Valuation allowance   (9,789,247)   (1,973,410)
Net deferred tax asset  $-   $- 

 

A 100% valuation allowance has been provided for all deferred tax assets, as the ability of the Company to generate sufficient taxable income in the future is uncertain.

 

 

Reconciliations of the expected federal income tax benefit based on the statutory income tax rate of 21% to the actual benefit for the years ended December 31, 2023 and 2022 are listed below.

 

   2023   2022 
  

For the Year Ended

December 31,

 
   2023   2022 
Expected federal income tax (expense) benefit  $(903,220)  $2,851,758 
State and local taxes, net of federal (expense) benefit   (226,714)   - 
Fair value adjustments   (819,270)   - 
Share-based compensation   (557,168)   (249,516)
Other permanent differences   118,765    - 
NOL carryover adjusted for expiration   -    46,936 
Equity method investment loss   -    (79,723)
Meals and entertainment   -    (4,843)
Research and development costs   -    (707,076)
Other temporary differences   -    329,829 
NOL carryover adjustments   (5,148,128)   - 
Intangibles   (720,407)   - 
Other true ups   (230,474)   - 
Changes in tax rates   673,449    - 
Change in valuation allowance   7,813,167    3,657,431 
Income tax (expense) benefit  $-   $5,844,796 

 

All tax years starting with 2021 are open for examination.