Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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

NOTE 11 – INCOME TAXES

 

Deferred taxes are determined by applying the provisions of enacted tax laws and rates for the jurisdictions in which the Company operates to the estimated future tax effects of the differences between the tax basis of assets and liabilities and their reported amounts in the Company's financial statements. A valuation allowance is established to reduce deferred tax assets if it is more likely than not that the related tax benefits will not be realized.

 

Due to losses since inception and for all periods presented, no income tax benefit or expense has been recognized as a full valuation allowance has been established for any tax benefit that would have been recognized for the loss in any period presented.

 

The components of income tax expense (benefit) for the years ended December 31, 2022 and 2021 are as follows:

             
    2022     2021  
             
Expected federal income tax benefit at statutory rate   $ 7,184,840     $ 8,426,269  
Non-deductible expenses     (288,249 )     (224,189 )
Research and development credit     595,244       537,705  
Return to provision true up     93,285       (94,707 )
Change in valuation allowance     (7,585,120 )     (8,834,492 )
Income tax benefit   $ –     $ –  

 

Significant components of the Company's deferred tax assets and liabilities at December 31, 2022 and 2021 are as follows:

             
    2022     2021  
Deferred tax assets                
Net operating losses   $ 9,106,430     $ 5,078,075  
Depreciation and amortization     1,502,868       46,030  
Research & development credit     1,308,956       592,276  
Lease liability     322,167       466,980  
Stock-based compensation     3,103,037       2,872,973  
Inventory     1,290,968       –  
Accrued expenses     233,284       478,171  
Capital loss carryover     261,922       –  
Other     177,074       336  
Total     17,306,705       9,534,840  
Valuation allowance     (16,661,612 )     (9,076,492 )
Net deferred tax asset     645,093       458,348  
Deferred tax liabilities                
Prepaid expenses     (328,836 )     –  
Right-of-use assets     (316,257 )     (458,348 )
Total net deferred taxes Deferred tax liabilities   $ –     $ –  

  

Management currently believes that since the Company has a history of losses it is more likely than not that the deferred tax regarding the loss carry forwards and other temporary differences will not be realized in the foreseeable future. The Company believes that carryforward limitations will be applied to the historical net operating losses due to the recent change of control transition. The Company's cumulative net operating loss carry forward of $43.4 million as of December 31, 2022, may be limited in future years depending on future taxable income in any given fiscal year. The net operating losses can be carried forward indefinitely.

  

The Company has recorded no liability for income taxes associated with unrecognized tax benefits at the date of adoption and has not recorded any liability associated with unrecognized tax benefits. Accordingly, the Company has not recorded any interest or penalty in regard to any unrecognized benefit.