XML 32 R20.htm IDEA: XBRL DOCUMENT v3.23.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
INCOME TAXES  
NOTE 14 - INCOME TAXES

NOTE 14 - INCOME TAXES

 

The Company has, subject to limitation, approximately $40.1 million of net operating loss carryforwards (“NOL”) at December 31, 2022, of which approximately $7.1 million will expire at various dates through 2037 and approximately $33.0 million can be carried forward indefinitely. We have provided a 100% valuation allowance for the deferred tax benefits resulting from the net operating loss carryover due to our lack of earnings history. In addressing the realizability 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 those temporary differences are deductible. The valuation allowance increased by approximately $3,919,000 and $3,272,000 for the years ended December 31, 2022 and 2021, respectively. Significant components of deferred tax assets and liabilities are as follows (in thousands):

 

 

 

2022

 

 

2021

 

Deferred tax assets (liabilities):

 

 

 

 

 

 

Net operating loss carryover

 

$8,723

 

 

$6,377

 

Intangibles amortization

 

 

375

 

 

 

350

 

Stock compensation

 

 

3,126

 

 

 

1,717

 

Capital losses

 

 

14

 

 

 

19

 

Bad debt allowance

 

 

376

 

 

 

221

 

Other

 

 

(689 )

 

 

(942)

 

Deferred revenue

 

 

(23

)

 

 

241

Total deferred tax assets, net

 

 

11,902

 

 

 

7,983

 

Less: valuation allowance

 

 

(11,902 )

 

 

(7,983 )

Net deferred tax assets

 

$

-

 

 

$-

 

 

The above NOL carryforward may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, and similar state provisions if the Company experienced one or more ownership changes which would limit the amount of NOL carryforward that can be utilized to offset future taxable income. In general, an ownership change, as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period. The Company has not completed an IRC Section 382/383 analysis. If a change in ownership were to have occurred, NOL carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.

The actual tax benefit differs from the expected tax benefit for the years ended December 31, 2022 and 2021 (computed by applying the U.S. Federal Corporate tax rate of 21% to income before taxes) are as follows:

 

 

 

2022

 

 

2021

 

Statutory federal income tax rate

 

 

(21.0 )%

 

 

(21.0 )%

State income taxes, net of federal benefits

 

 

(0.11 )%

 

 

(2.10)%

Non-deductible items

 

 

5.82%

 

 

3.26%

True ups

 

 

(8.50 )%

 

 

(0.19 )%

Change in valuation allowance

 

 

23.79%

 

 

20.03%

Effective income tax rate

 

-

%

 

-

%

 

The Company’s tax returns for the previous three years remain open for audit by the respective tax jurisdictions.