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Income Taxes
 6 Months Ended 12 Months Ended
Jun. 30, 2024
Jun. 30, 2024
Dec. 31, 2023
Income Taxes [Line Items]      
Income taxes  

Note 19 — Income taxes

 

The Company’s income tax expenses for years ended June 30, 2024 and 2023 are as follows: 

 

   For the Years Ended
June 30,		 
   2024   2023 
Federal        
Current  $12,690   $13,502 
Deferred   

—

    

—

 
State          
Current   7,138    735 
Deferred   

—

    

—

 
Total provision for income taxes   19,828    14,237 

 

Income tax expense for the years ended June 30, 2024 and 2023 varied from the amount computed by applying the statutory income tax rate to income before taxes. Reconciliations between the expected federal income tax rates using 21% for the years ended June 30, 2024 and 2023 to the Company’s effective tax rate are as follows:

 

   For the Years Ended
June 30,		 
   2024   2023 
         
Federal statutory tax rate   21.0%   21.0%
State statutory tax rate, net of deduction on federal tax return   4.2%   5.8%
Permanent difference   (1.7)%   1.3%
Others   0.9%   
-
%
Change in valuation allowance   (25.0)%   (8.4)%
Effective tax rate   (0.6)%   19.7%

 

The Company had a cumulative net operating loss carryforward (“NOL”) for federal, California, and Georgia state income tax purpose of approximately $8.4 million, $2.0 million, and $1.5 million, respectively, as of June 30, 2024. The Company elected 100% allowance on deferred tax asset for the years ended June 30, 2024 and 2023 and incurred approximately $0.8 million and $1.2 million allowance on deferred tax asset, respectively. The Company’s NOL is limited to 80% of the excess of taxable income on federal level, same apply to the state of Georgia, with no limitation to the state of California. Both Company’s federal and the state of Georgia NOLs will last indefinitely. The state of California NOLs can be carried for 20 years. The valuation allowance increased by approximately $0.8 million from approximately $1.2 million on June 30, 2023 to approximately $2.0 million on June 30, 2024.

 

The Company’s ability to use its federal net operating carryforward may be limited if the Company experiences an “ownership change” as defined in Section 382 (“Section 382”) of the Internal Revenue Code of 1986, as amended. As of June 30, 2024 and 2023, the Company has not performed any Section 382 study.

 

The Company’s deferred tax accounts are comprised of the following as of:

 

   June 30,
2024		   June 30,
2023		 
Deferred tax assets        
Net operating loss        
Federal  $1,758,686    1,086,843 
State   212,385    34,863 
Capitalized R&D expense   70,451    55,540 
Accrued warranty expense   7,382    
-
 
Lease liabilities   109,903    
-
 
Less:  valuation allowance   (2,034,319)   (1,172,171)
Total deferred tax assets   124,488    5,075 
           
Deferred tax liabilities:          
Depreciation of property and equipment  $(14,371)  $(5,075)
Right of use assets   (110,117)   
-
 
Total deferred tax liability   (124,488)   (5,075)
Total deferred tax accounts, net  $
-
   $
-
 

 

The Company’s taxes payable consist of the following:

 

   June 30,   June 30, 
   2024   2023 
Income taxes payable  $
-
   $15,842 

 

Uncertain tax positions

 

The Company evaluates each uncertain tax position (including the potential application of interest and penalties) based on the marketing performance and measures the unrecognized benefits associated with the tax positions. As of June 30, 2024 and 2023, the Company did not have any significant unrecognized uncertain tax positions.

  
Acri Capital Acquisition Corporation [Member]      
Income Taxes [Line Items]      
Income taxes

Note 9 — Income Taxes

 

As of June 30, 2024 and December 31, 2023, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate for the three months ended June 30, 2024 and 2023 were (42.1)% and 50.5%, respectively. The effective tax rate for the six months ended June 30, 2024 and 2023 were 637.4% and 34.5%, respectively. The effective tax rate differs from the federal and state statutory tax rate of 21.0 % primarily due to the valuation allowance on the deferred tax assets and nondeductible transaction costs.

  

Note 9 — Income Taxes

 

The income tax provision (benefit) consists of the following for the year ended December 31, 2023 and the period from January 7, 2022 (inception) through December 31, 2022:

 

   For the
year ended
December 31,
2023		   For the
Period
from
January 7,
2022 (inception)
through
December 31,
2022		 
Current        
Federal  $458,077   $173,680 
State   
—
    
—
 
Deferred          
Federal   (162,336)   (67,458)
State        
—
 
Valuation allowance   135,678    128,052 
Income tax provision   431,419   $234,274 

 

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

 

   For the
year ended
December 31,
2023		   For the Period
from January 7,
2022 (inception)
through
December 31,
2022		 
U.S. statutory rate   21.0%   21.0%
Change in valuation allowance   10.3%   28.4%
Permanent difference   1.4%   2.5%
Effective tax rate   32.7%   51.9%

 

The Company’s net deferred tax assets were as follows as of:

 

   December 31,
2023		   December 31,
2022		 
Deferred tax assets:        
Start-up costs  $263,730   $128,052 
Valuation allowance   (263,730)   (128,052)
Total deferred tax assets   
—
    
—
 
Accrued interest income   (33,937)   (60,594)
Deferred tax liability, net  $(33,937)  $(60,594)

 

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax assets, projected future taxable income and tax planning strategies in making this assessment. After consideration of all of the information available, management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance.

 

As of December 31, 2023 and December 31, 2022, the Company’s deferred tax asset had a full valuation allowance recorded against it. The effective tax rate for the year ended December 31, 2023 and for the period from January 7, 2022 (inception) through December 31, 2022 were 32.7% and 51.9%, respectively. The effective tax rate differs from the federal and state statutory tax rate of 21.0% primarily due to the valuation allowance on the deferred tax assets.