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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Taxes  
Income taxes

Note 11 – Income Taxes

 

Deferred income taxes are provided based on the provisions of ASC Topic 740, “Accounting for Income Taxes”, to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

 

Significant components of the Company’s net deferred income taxes are as follows:

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Deferred tax assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

$168,897

 

 

$208,742

 

Capitalized start-up costs

 

 

65,305

 

 

 

83,710

 

Other intangibles

 

 

8,068

 

 

 

10,339

 

Other accruals

 

 

17,425

 

 

 

1,875

 

Stock compensation

 

 

80,374

 

 

 

17,423

 

Net operating loss

 

 

1,009,495

 

 

 

381,112

 

Contribution carryforward

 

 

346

 

 

 

—

 

Unrealized gain/loss

 

 

(10,499 )

 

 

—

 

Unearned revenue

 

 

5,763

 

 

 

—

 

Research and development costs

 

 

353,746

 

 

 

—

 

Deferred tax assets

 

 

1,698,920

 

 

 

703,211

 

Less valuation allowance

 

 

(1,665,938 )

 

 

(703,083 )

Net deferred tax assets after valuation allowance

 

$32,982

 

 

$128

 

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation

 

$(32,982 )

 

$(128)

Deferred tax liabilities

 

 

(32,982 )

 

 

(128)

Net deferred tax asset (liability)

 

$—

 

 

$—

 

A reconciliation of the U.S. statutory federal income tax rate to the effective income tax rate (benefit) follows:

 

Rate Reconciliation

 

 

 

December 31,

 

 

 

2022

 

 

2021

 

Rate Reconciliation

 

 

 

 

 

 

Federal income tax at statutory rate

 

 

21.00%

 

 

21.00%

Change in state tax

 

 

0.02%

 

 

0%

Change in valuation allowance

 

 

-20.59%

 

 

-22.16%

Permanent differences

 

 

-1.80%

 

 

-12.26%

State taxes

 

 

2.05%

 

 

1.98%

Other

 

 

-0.68%

 

 

11.44%

 

The Company has gross net operating loss carryforwards for federal tax purposes totaling approximately $4.4 million and $1.7 million at December 31, 2022 and 2021 respectively, which will carry forward indefinitely.  The Company has gross net operating loss carryforwards for state tax purposes totaling approximately $1.45 million and $0.01 million at December 31, 2022 and 2021 respectively, which will carry forward indefinitely.

 

NOLs that were acquired with the acquisition of businesses are excluded from the amount of available NOLs to the extent their use is limited by the provisions of Section 382 of the Internal Revenue Code. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company's ownership may result in further limitation on the amount of net operating loss carryforwards which can be utilized in future years.  The Company has determined that all net operating losses are fully available as of December 31, 2022, but has not completed a formal section 382 analysis. 

 

In evaluating the amount of the valuation allowance against its deferred tax assets as of December 31, 2022 and 2021, the Company considered all available positive and negative evidence and concluded that it is more likely than not that a portion of its deferred tax assets would not be realized. Accordingly, the Company has recorded a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets.

 

The Company had no unrecognized tax benefits as of December 31, 2022 and 2021. The Company does not anticipate a significant change in total unrecognized tax benefits within the next 12 months. Tax years 2019-2021 remain open to examination by the major taxing jurisdictions to which the Company is subject.