INCOME TAXES

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 13 - INCOME TAXES

The provision for federal and state income taxes for the years ended is as follows:

	2022		2021
Current provision:
Federal	$	—	$	(110,234	)
State		—		18,415
Deferred provision (benefit):
Federal	$	—	$	—
State		—		—
Total Deferred		—		—
Total provision for income taxes	$	—	$	(91,819	)

Realization of future tax benefits related to the deferred tax assets is dependent on many factors, including the Company’s ability to generate taxable income within the net operating loss carryforward period. Management has considered these factors in reaching conclusion as to the valuation allowance for financial reporting purposes and has recorded a full valuation allowance against the deferred tax asset.

The income tax effect of temporary differences comprising the deferred tax assets and deferred tax liabilities is a result of the following at December 31:

	2022			2021
Deferred tax assets:
Net operating loss	$	3,170,457		$	1,732,422
Fixed assets		(51,573	)		14,493
Lease		52,340			1,201
Loss on contingency		(193,398	)		130,765
Intangible assets		1,663,044			1,707
Research and development		64,189			0
Stock based compensation		95,908			284,468
Accrual to cash conversion		1,099,403			216,068
Total	$	5,900,370		$	2,381,124
Valuation allowance	$	(5,900,370	)	$	(2,381,124	)
Net	$	—		$	—

The income tax provision differs from the expense that would result from applying federal statutory rates to income before income taxes because the Company is subject to state income taxes, deferred income taxes are based on average tax rates and a portion of gifts and meals and entertainment are not tax deductible. A valuation allowance has been provided to reduce deferred tax assets to an amount that is more likely than not to be realized.

Prior to the share exchange, Munn Works, LLC was taxed as a single member Limited Liability Company for federal and state income tax purposes. As such, the Company will not pay income taxes for earnings prior to the share exchange, as any income or loss will be included in the tax returns of the individual member. Accordingly, no provision is made for income taxes in the financial statements prior to the share exchange.

Effective tax rates differ from the federal statutory rate of 21% applied to income before provision for income taxes due to the following:

	2022			2021
Federal statutory rate times financial statement income	$	(3,551,627	)	$	(1,552,673	)
Permanent tax basis differences		(2,268	)		(72,997	)
Deferred true up		159,849			13,911
State taxable income, net		(158,480	)		(86,700	)
Change in Valuation allowance		3,519,246			1,524,637
Rate change		—			154,179
True up		—			(91,819	)
Other		33,280			19,643
Total provision for income taxes	$	—		$	(91,819	)

The Company has available net operating loss approximately $16,757,643 for tax purposes to offset future taxable income. Pursuant to the Tax Reform Act of 1986, annual utilization of the Company’s net operating loss and contribution carryforwards may be limited if a cumulative change in ownership of more than 50% is deemed to occur within any three-year period. The tax years 2018 through 2021 remain open to examination by federal agencies and other jurisdictions in which it operates.