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 11. INCOME TAXES

The components of the provision consist of the following for the years ended December 31, 2022 and 2021:

 

 

 

2022

 

 

2021

 

U.S.(loss)

 

$

(6,839,931

)

 

$

(770,771

)

Non-U.S. income

 

 

5,275,629

 

 

 

2,931,220

 

Income (loss) before income taxes

 

$

(1,564,302

)

 

$

2,160,449

 

 

 

 

 

 

 

 

 

 

2022

 

 

2021

 

Current:

 

 

 

 

 

 

Federal

 

$

240,809

 

 

$

(62,074

)

State

 

 

(7,570

)

 

 

11,500

 

Foreign

 

 

78,465

 

 

 

74,885

 

Total current

 

 

311,704

 

 

 

24,311

 

Deferred:

 

 

 

 

 

 

Federal

 

 

(90,774

)

 

 

(97,965

)

State

 

 

(12,043

)

 

 

122,291

 

Total deferred

 

 

(102,817

)

 

 

24,326

 

Provision for income taxes

 

$

208,887

 

 

$

48,637

 

 

The income tax provision differs from that computed at the federal statutory corporate income tax rate as follows for the years ended December 31, 2022 and 2021:

 

 

 

2022

 

 

2021

 

Tax provision computed at the federal statutory rate

 

$

(341,315

)

 

$

453,694

 

Foreign rate differential

 

 

(121,061

)

 

 

(540,670

)

State income tax, net of federal benefit

 

 

(48,062

)

 

 

22,226

 

162(m) compensation limit

 

 

208,884

 

 

 

228,069

 

Share based compensation

 

 

(282,956

)

 

 

(615,062

)

Subpart F income

 

 

224,285

 

 

 

717,218

 

Other permanent items

 

 

 

 

 

1,138

 

Credits

 

 

(78,465

)

 

 

(94,223

)

Impact of CARES Act

 

 

(76,443

)

 

 

(71,168

)

State tax true ups

 

 

 

 

 

(79,997

)

Other rate changes, net of benefit

 

 

6,019

 

 

 

(15,698

)

Uncertain tax positions

 

 

(17,723

)

 

 

1,933

 

Change in valuation allowance

 

 

735,724

 

 

 

41,177

 

Provision for income taxes

 

$

208,887

 

 

$

48,637

 

 

The tax effects of significant temporary differences representing net deferred tax assets and liabilities consisted of the following at December 31, 2022 and 2021:

 

 

 

2022

 

 

2021

 

Deferred Tax Assets:

 

 

 

 

 

 

Right-of-use asset

 

$

228,408

 

 

$

268,137

 

Net operating loss

 

 

440,756

 

 

 

88,879

 

Share based compensation

 

 

291,019

 

 

 

228,574

 

Intangible assets

 

 

258,321

 

 

 

176,457

 

Tax credits

 

 

175,341

 

 

 

 

Capitalized R&D Cost

 

 

119,936

 

 

 

 

Accruals and reserves

 

 

83,411

 

 

 

127,332

 

Debt issuance costs

 

 

110,339

 

 

 

50,246

 

Other

 

 

54,465

 

 

 

7,232

 

Total deferred tax assets

 

 

1,761,996

 

 

 

946,857

 

 

 

 

 

 

 

 

Total valuation allowance

 

 

(1,337,290

)

 

 

(601,566

)

 

 

 

 

 

 

 

Deferred Tax Liabilities:

 

 

 

 

 

 

Right-of-use liability

 

 

(245,686

)

 

 

(285,111

)

Prepaid assets

 

 

(135,535

)

 

 

(171,411

)

Basis difference in fixed assets

 

 

(113,061

)

 

 

(62,968

)

Other

 

 

(2,825

)

 

 

(1,019

)

Total deferred tax liabilities

 

 

(497,107

)

 

 

(520,509

)

Net deferred tax liabilities

 

$

(72,401

)

 

$

(175,218

)

 

On March 28, 2022, the Company redomiciled PGP from Isle of Man to Nevada with the Company remaining as its sole member. The change in place of organization is categorized as a tax-free reorganization. Following this action, PGP’s earnings will be included in the US taxable income of the Company. Further, the Company has recorded a deferred tax asset equal to the tax basis of deferred attributes of PGP at statutory rates.

 

As of December 31, 2022, the Company recognized federal and state net operating loss carryforwards of $1.4 million and $2.2 million, respectively. The majority of the state carryforward amounts will begin to expire in 2040, while some state net operating losses have an indefinite carryforward period. The federal carryforward does not expire and subject to utilization in future periods up to 80% of federal taxable income.

 

In accordance with U.S. GAAP, the need to establish a valuation allowance against deferred tax assets is assessed periodically based on a more-likely-than-not realization threshold. Appropriate consideration is given to all positive and negative evidence related to that realization. This assessment considers, among other matters, the nature, frequency and severity of recent losses; forecasts of future profitability; the duration of statutory carryforward periods; experience with tax attributes expiring unused; and tax planning alternatives. The weight given to these considerations depends upon the degree to which they can be objectively verified.

 

A significant piece of objective negative evidence evaluated was the three-year cumulative loss position the company is in as of the period ended December 31, 2022. Such objective negative evidence limits the ability to consider other more subjective evidence such as projections of future income. The amount of the deferred tax asset considered realizable could be adjusted in future periods if the objective negative evidence of a cumulative loss is no longer present, and more weight is given to subjective evidence such as future income and growth.

 

Upon assessing all of the relevant evidence, the Company determined it has not met the more-likely-than-not threshold to support the realization of all or part of its deferred tax assets. The Company has recorded a valuation allowance against certain of its deferreds in the amount of $(1,337,290). The current-year change resulted in additional tax expense of $735,724, which impacted the Company’s effective tax rate by (45.27)%.

 

The aggregate changes in the balance of gross unrecognized tax benefits (included as part of deferred tax liabilities, net in the accompanying financial statements), which excludes interest and penalties, are as follows as of and for the years ended December 31, 2022 and 2021:

 

 

 

2022

 

 

2021

 

Beginning balance

 

$

48,632

 

 

$

46,699

 

Decreases (increases) related to tax positions taken during the prior year

 

 

(17,723

)

 

 

1,933

 

Ending balance

 

$

30,909

 

 

$

48,632

 

 

Our total liability for unrecognized gross tax benefits was $30,909 as of December 31, 2022, which, if ultimately recognized, would impact the annual estimated effective tax rate in future periods. We are subject to examination by the Internal Revenue Service for fiscal years 2019 and thereafter. For states within the U.S. in which we conduct significant business, we generally remain subject to examination for fiscal years 2019 and thereafter, unless extended for longer periods under state laws. We have no accrual for interest or penalties related to uncertain tax positions at December 31, 2022 and 2021, and did not recognize interest or penalties in the statements of operations during the years ended December 31, 2022 and 2021, as such amounts would be immaterial, if any.