Income Taxes

12 Months Ended

Dec. 31, 2023

Income Taxes

Income Taxes

Note 9: Income Taxes

The Company had deferred tax assets, as a result of prior operating losses, of $3.4 million at December 31, 2022 and December 31, 2023. The net operating loss carry-forward is approximately $17.7 million to be used to offset otherwise taxable income in the future. The net operating loss carry-forward would indicate a deferred asset of $4.4 million compared to the balance sheet amount of $3.4 million, therefore no income tax was recorded for 2023 as it was offset fully against net operating losses at a tax rate of 24%. No temporary differences were noted. In effect, we have a reserve in the deferred tax asset account of $1.0 million. The net operating losses were generated primarily in the transition the Company made from its original free-standing locations to the more modern Craft Pizza & Pub style locations. In addition, the Company transformed as a major franchisor of non-traditional locations (which are defined as locations within some other type business or activity). Formerly net operating losses not used expired after 20 years. The remaining carry-forward is indefinite but they can only be used to offset up to 80% of the otherwise taxable income in any one tax year, however the unused net operating loss carry-forward continues to be carried forward for future years.  As with any other asset, the Company is required to evaluate whether or not that tax credit is more likely than not to be used in coming years.  The Company has made this evaluation and determined that the deferred tax credit recorded will more likely than not be used within the next four years. The deferred tax asset is based on an effective tax rate for State and Federal income taxes of 24%.  According to the internal projections made by the Company, the net operating loss carry-forward will be fully utilized to offset income taxes in future years.  Should there be a significant change in the Company’s ownership, the Company’s future use of its existing net operating losses may be limited.