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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12 – Income Taxes

 

The components of the provision for income taxes consists of the following for the years ended December 31, 2021 and 2020:

 

 

   2021   2020 
   Year Ended December 31, 
   2021   2020 
Current:          
Federal  $6,092,730   $- 
State   886,173    637,760 
Total current  $6,978,903   $637,760 
Deferred:          
Federal   1,394,686    (452,544)
State   603,642    (94,680)
Total deferred   1,998,328    (547,224)
Total income tax expense  $8,977,231   $90,536 

 

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:

 

   2021   2020 
   Year Ended December 31, 
   2021   2020 
Federal income tax expense at statutory rate   21.0%   21.0%
State income tax expense, net of federal tax benefit   3.9    3.3 
Permanent differences:          
- Foreign derived intangible income deduction   (3.5)    (1.7) 
- Stock based compensation   0.2    (8.8) 
- Other permanent differences   0.3    (0.4) 
Research and development credits   (2.6)    (2.0) 
Change in uncertain tax positions   1.4    1.1 
Change in valuation allowance   0.0    (12.1) 
Other   (1.0)    (0.2) 
Effective income tax rate   19.7%   0.2%

 

 

Net deferred tax assets consist of the following components as of December 31, 2021 and 2020:

 

   2021   2020 
   December 31, 
   2021   2020 
Deferred tax assets:          
Accrued liabilities  $-   $37,898 
Reserves and allowances   166,050    200,049 
Deferred compensation   393,871    241,652 
Research and development credits   -    423,001 
Total deferred tax assets   559,921    902,600 
Deferred tax liabilities:          
Property and equipment, net   (477,542)   (233,951)
Intangibles, net   (6,743,972)   - 
Prepaids   (560,093)   (66,456)
Other   (6,758)   (54,969)
Total deferred tax liabilities   (7,788,365)   (355,376)
Net deferred tax assets (liabilities)   (7,228,444)   547,224 
Less valuation allowance   -    - 
Net deferred tax assets (liabilities)  $(7,228,444)  $547,224 

 

At December 31, 2021, the Company had no federal or state net operating loss carryforwards and no federal or state research and development credit carryforwards.

 

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2020, in part because in that year the Company achieved three years of cumulative pre-tax income, management determined that there was sufficient positive evidence to conclude that it was more likely than not that its deferred taxes were realizable. The Company therefore fully reduced its valuation allowance accordingly by $5,161,500.

 

ASC Topic 740-10-05 requires that the impact of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. Our unrecognized tax benefit balances included $1,067,853 at December 31, 2021 and $447,831 at December 31, 2020 of tax positions that, if recognized, would impact our effective tax rate. The Company expects no material changes to the liability for unrecognized tax benefits in the next 12 months. Interest and penalties associated with uncertain tax positions are recorded as a component of income tax expense. A reconciliation of the beginning and ending amount of unrecognized benefits is as follows:

 

   December 31, 
   2021   2020 
Unrecognized tax benefits at the beginning of the year  $447,831   $- 
Gross increases - current year tax positions   770,069    232,145 
Gross increases - prior year tax positions   -    215,686 
Gross decreases - prior year tax positions   (150,047)   - 
Unrecognized tax benefits at end of year  $1,067,853   $447,831 
           
Interest and penalties in year-end balance  $-   $- 

 

 

The Company is subject to taxation in the United States and other state jurisdictions. The tax years from December 31, 2017 through December 31, 2021 remain open to examination for federal income tax purposes and by the other major taxing jurisdictions to which the Company is subject. The Company is not currently under examination by any taxing authority.