Registration of securities issued in business combination transactions

Note 12 - Income Taxes

v3.23.4
Note 12 - Income Taxes
 9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
Notes to Financial Statements    
Income Tax Disclosure [Text Block]

Note 11.         Income Taxes

 

For the three and nine months ended September 30, 2022, the Company’s effective tax rate was 0%. The difference between the statutory tax rate and the effective tax rate is primarily driven by the presence of a full valuation allowance against all deferred tax assets.

Note 12.         Income Taxes

 

Income tax expense for the years ended December 31, 2022 and 2021 consists of the following:

 

   

2022

    

2021

  

Current income tax (expense) benefit

                

Federal

   $ (2,533 )   $ -  

State & Local

     (7,566 )     (1,813 )
      (10,099 )     (1,813 )

Deferred income tax (expense) benefit

                

Federal

     723,041       973,918  

State & Local

     385,342       98,749  
      1,108,383       1,072,667  

Income tax benefit

   $ 1,098,284     $ 1,070,854  

 

The provision for income taxes is at an effective rate different from the federal statutory rate due principally to the following:

 

   

2022

    

2021

  

Loss before taxes

   $ (18,852,122 )   $ (2,202,303 )

Income tax benefit at federal statutory rate

   $ 3,957,892     $ 462,484  

State income tax benefit, net of federal benefit

     379,365       97,318  
Permanent Differences     (1,313,947 )     (111,237 )

Net Operating Loss ("NOL") expirations

     (12,431 )     -  

Other

     163,945       19,485  

Federal valuation allowance

     (2,076,540 )     602,804  

Income tax benefit

   $ 1,098,284     $ 1,070,854  

 

Deferred Income Taxes

 

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows:

 

   

2022

    

2021

  

Deferred tax assets

                

Net operating losses

   $ 2,649,902     $ 547,035  

Stock-based compensation

     743,915       428,072  

Accrued commissions

     17,836       50,047  

Accrued vacations

     46,665       41,331  

Fixed assets

     1,509       -  
Other     28,025       -  

Deferred tax assets before valuation allowance

     3,487,852       1,066,485  

Valuation allowance

     (2,793,271 )     -  

Net deferred tax assets

     694,581       1,066,485  

Deferred tax liabilities

                

Intangible Assets

     (753,702 )     (2,185,281 )

Fixed Assets

     -       (3,434 )

Other

     -       (45,274 )

Deferred tax liabilities

     (753,702 )     (2,233,989 )

Net deferred tax liabilities

   $ (59,121 )   $ (1,167,504 )

 

The Company has net operating loss carryforwards of approximately $9.4 million, of which $1.3 million will expire, if unused, between the years 2023 and 2037. 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.

 

The Company has analyzed its income tax positions using the criteria required by U.S. GAAP and concluded that, as of December 31, 2022 and 2021, it has no material uncertain tax positions and no interest and penalties have been accrued. The Company has elected to recognize any estimated penalties and interest on its income tax liabilities as a component of its provision for income taxes.

 

Our income tax returns are subject to examination by income taxing authorities in all jurisdictions for which we file tax returns, generally for three years after each return was filed, but extending to years from which net operating loss carryforwards are utilized to reduce current year taxes. We are not currently under audit in any jurisdiction.