Note 11 - Income Taxes

9 Months Ended

12 Months Ended

Sep. 30, 2023

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 11.         Income Taxes

For the three and nine months ended September 30, 2022, the Company’s effective tax rate was 0%. The difference between the statutory tax rate and the effective tax rate is primarily driven by the presence of a full valuation allowance against all deferred tax assets.

Note 12.         Income Taxes

Income tax expense for the years ended December 31, 2022 and 2021 consists of the following:

	2022			2021
Current income tax (expense) benefit
Federal	$	(2,533	)	$	-
State & Local		(7,566	)		(1,813	)
		(10,099	)		(1,813	)
Deferred income tax (expense) benefit
Federal		723,041			973,918
State & Local		385,342			98,749
		1,108,383			1,072,667
Income tax benefit	$	1,098,284		$	1,070,854

The provision for income taxes is at an effective rate different from the federal statutory rate due principally to the following:

	2022			2021
Loss before taxes	$	(18,852,122	)	$	(2,202,303	)
Income tax benefit at federal statutory rate	$	3,957,892		$	462,484
State income tax benefit, net of federal benefit		379,365			97,318
Permanent Differences		(1,313,947	)		(111,237	)
Net Operating Loss ("NOL") expirations		(12,431	)		-
Other		163,945			19,485
Federal valuation allowance		(2,076,540	)		602,804
Income tax benefit	$	1,098,284		$	1,070,854

Deferred Income Taxes

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities were as follows:

	2022			2021
Deferred tax assets
Net operating losses	$	2,649,902		$	547,035
Stock-based compensation		743,915			428,072
Accrued commissions		17,836			50,047
Accrued vacations		46,665			41,331
Fixed assets		1,509			-
Other		28,025			-
Deferred tax assets before valuation allowance		3,487,852			1,066,485
Valuation allowance		(2,793,271	)		-
Net deferred tax assets		694,581			1,066,485
Deferred tax liabilities
Intangible Assets		(753,702	)		(2,185,281	)
Fixed Assets		-			(3,434	)
Other		-			(45,274	)
Deferred tax liabilities		(753,702	)		(2,233,989	)
Net deferred tax liabilities	$	(59,121	)	$	(1,167,504	)

The Company has net operating loss carryforwards of approximately $9.4 million, of which $1.3 million will expire, if unused, between the years 2023 and 2037. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets.

The Company has analyzed its income tax positions using the criteria required by U.S. GAAP and concluded that, as of December 31, 2022 and 2021, it has no material uncertain tax positions and no interest and penalties have been accrued. The Company has elected to recognize any estimated penalties and interest on its income tax liabilities as a component of its provision for income taxes.

Our income tax returns are subject to examination by income taxing authorities in all jurisdictions for which we file tax returns, generally for three years after each return was filed, but extending to years from which net operating loss carryforwards are utilized to reduce current year taxes. We are not currently under audit in any jurisdiction.