Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.23.1
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 16 – INCOME TAXES

 

The Company files corporate income tax returns in the United States (federal) California, Florida, and New York. The Company is subject to federal, state and local income tax examinations by tax authorities through inception.

 

As of December 31, 2022 and 2021, the Company had federal and state net operating loss carry forwards of $30,738,510 and $25,729,952, respectively that may be offset against future taxable income. Of the total amount of available losses 5,239,877 can be used to offset 100% of future income and will begin to expire in 2031 through 2037. The remaining losses have an infinite carry forward but can only reduce future taxable income a maximum of 80% annually. The Company has done an analysis of Internal Revenue Code (IRC) Section 382 ownership changes and determined that the Merger in 2021 created a limitation event. Of the total outstanding NOL carry-forwards $20,792,747 is subject to an annual IRC Sec 382 limitation of $251,691.

 

The tax effects of temporary differences which give rise to deferred tax assets (liabilities) are summarized as follows:

 

    For the Years Ended December 31,  
    2022     2021  
Net operating loss carry forwards   $ 7,331,884     $ 4,181,841  
Share-based compensation     1,633,894       806,997  
Accrued expenses     795,859       301,422  
Intangible assets     107,222       100,736  
Fixed assets     (28,768 )     (29,877 )
Research and development     64,579       -  
Valuation allowance     (9,904,670 )     (5,361,119 )
Net Deferred Tax Asset   $
-
     $
-
  

  

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 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 become deductible. Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.

 

Reconciliation of the statutory federal income tax to the Company's effective tax:

 

    For the Years Ended  
    December 31,  
    2022     2021  
             
Statutory federal tax rate     21.0 %     21.0 %
State tax expense     4.5 %     4.7 %
Acquired deferred tax assets     0.0 %     7.8 %
PPP loan forgiveness     0.0 %     0.3 %
Change in tax rate     (1.2 )%     (0.9 )%
Amortization     (2.9 )%     (0.4 )%
Other permanent items     (0.0 )%     (0.3 )%
Prior year deferred asset adjustment     15.4 %     0.0 %
Valuation allowance     (36.8 )%     (32.2 )%
Provision for income taxes    
-
 %    
-
 %

 

The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of December 31, 2022 and 2021 the Company had no unrecognized tax benefits. There were no changes in the Company’s unrecognized tax benefits during the years ended December 31, 2022 and 2021. The Company did not recognize any interest or penalties during fiscal 2022 or 2021 related to unrecognized tax benefits.

 

All tax years remain open to examination for federal income tax purposes and by other major taxing jurisdictions to which the Company is subject.