INCOME TAXES

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 12. INCOME TAXES

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

	2021			2020
U.S.(loss)	$	(770,771	)	$	(3,477,895	)
Non-U.S. income		2,931,220			663,071
Income (loss) before income taxes	$	2,160,449		$	(2,814,824	)
	2021			2020
Current:
Federal	$	(62,074	)	$	(1,204,556	)
State		11,500			1,745
Foreign		74,885			—
Total current		24,311			(1,202,811	)
Deferred:
Federal		(97,965	)		674,138
State		122,291			(77,264	)
Total deferred		24,326			596,874
Provision (benefit) for income taxes	$	48,637		$	(605,937	)

The income tax provision differs from that computed at the federal statutory corporate income tax rate as follows for the years ended December 31, 2021 and 2020:

	2021			2020
Tax provision computed at the federal statutory rate	$	453,694		$	(591,113	)
Foreign rate differential		(540,670	)		(139,246	)
State income tax, net of federal benefit		22,226			(55,558	)
162(m) compensation limit		228,069			—
Share based compensation		(615,062	)		(4,568	)
Subpart F income		717,218			204,326
Non-taxable PPP loan forgiveness		—			(176,451	)
Other permanent items		1,138			29,511
Credits		(94,223	)		(24,801	)
Impact of CARES Act		(71,168	)		(466,642	)
State tax true ups		(79,997	)		10,153
Change in federal statutory rate, net of benefit		(15,698	)		1,364
Uncertain tax positions		1,933			46,699
Valuation allowance		41,177			560,389
Provision (benefit) for income taxes	$	48,637		$	(605,937	)

The tax effects of significant temporary differences representing net deferred tax assets and liabilities consisted of the following at December 31, 2021 and 2020:

	2021			2020
Deferred Tax Assets:
Right-of-use asset	$	268,137		$	320,787
Share based compensation		228,574			313,910
Intangible assets		176,457			182,511
Accruals and reserves		127,332			67,259
Debt issuance costs		50,246			—
Other		96,111			86,231
Total deferred tax assets		946,857			970,698
Total valuation allowance		(601,566	)		(560,389	)
Deferred Tax Liabilities:
Right-of-use liability		(285,111	)		(316,481	)
Prepaid assets		(171,411	)		(207,005	)
Basis difference in fixed assets		(62,968	)		(37,715	)
Other		(1,019	)		—
Total deferred tax liabilities		(520,509	)		(561,201	)
Net deferred tax liabilities	$	(175,218	)	$	(150,892	)

On August 21, 2020, the Company completed the acquisition of 100% of the member interests in PGP. As of December 31, 2020, the Company has evaluated its deferred tax attributes related to the acquisition within the foreign jurisdiction of Isle of Man and recorded a tax-effected deferred tax asset of $0 as of December 31, 2020. The Company has assessed the foreign subsidiary income and Subpart F requires us to include the income of PGP in the U.S. tax base on an annual basis.

In addition, as of December 31, 2021, the Company recognized state net operating loss carryforwards of $1.0 million. The majority of the state carryforward amounts will begin to expire in 2040, while some state net operating losses have an indefinite carryforward period.

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, 2021. 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 $601,566. The current-year change resulted in additional tax expense of $41,177, which impacted the Company’s effective tax rate by 1.91%.

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, 2021 and 2020:

	2021		2020
Beginning balance	$	46,699	$	—
Increases related to tax positions taken during the prior year		—		45,207
Increases related to tax positions taken during the current year		1,933		1,492
Other adjustments		—		—
Ending balance	$	48,632	$	46,699

Our total liability for unrecognized gross tax benefits was $48,632 as of December 31, 2021, 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 2018 and thereafter. For states within the U.S. in which we conduct significant business, we generally remain subject to examination for fiscal years 2018 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, 2021 and 2020, and did not recognize interest or penalties in the statements of operations during the years ended December 31, 2021 and 2020, as such amounts would be immaterial, if any.