Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 14. Income Taxes

The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. While the Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for the valuation allowance, in the event the Company were to determine that it would not be able to realize all or part of its net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should the Company determine that it would be able to realize its deferred tax assets in the future in excess of its net recorded amount, an adjustment to the deferred tax assets would increase income in the period such determination was made.

The components of the provision for income tax expense are as follows for the years ended:

	December 31,
	2023			2022
Current taxes
Federal	$	—		$	—
State		—			—
Current taxes		—			—
Change in deferred taxes		347,400			680,108
Change in valuation allowance		(347,400	)		(680,108	)
Provision for income tax expense	$	—		$	—

The following is a summary of the significant components of the Company’s deferred tax assets and liabilities at December 31, 2023 and 2022:

	December 31,
	2023			2022
Deferred tax assets:
Equity based compensation	$	416,237		$	395,600
Allowance for doubtful accounts		13,800			7,200
Reserves for slow moving inventory		47,800			42,200
Depreciation		23,800			13,800
Reserve for recall		3,200			(33,700	)
Net operating loss carryforward		2,027,000			1,759,300
Total deferred tax assets		2,531,800			2,218,100
Deferred tax liabilities
Reserve for recall		-			(33,700	)
Total deferred tax asset (liability)		-			(33,700	)
Total deferred tax		2,531,800			2,184,400
Valuation allowance		(2,531,800	)		(2,184,400	)
Deferred tax assets, net of valuation allowance	$	-		$	-

The effective tax rate used for calculation of the deferred taxes as of December 31, 2023 was 25.35%. The Company has established a 100% valuation allowance against deferred tax assets of approximately $2,531,800, due to the uncertainty regarding realization reserve against the deferred tax assets. The change in valuation allowance was an increase of $347,400. The Company has approximately $3,346,650 of net loss carryforward that expire through 2037 and $4,651,143 that carryforward indefinitely but is limited to 80% of taxable income in any one year.

The effective tax rate used for calculation of the deferred taxes as of December 31, 2022 was 25.35%. The Company has established a 100% valuation allowance against deferred tax assets of $2,184,400 due to the uncertainty regarding realization reserve against the deferred tax assets. The change in valuation allowance was an increase of $347,400.

The significant differences between the statutory tax rate and the effective tax rates for the Company for the years ended are as follows:

	December 31,
	2023			2022
Statutory tax rate		(21.00	)%		(21.00	)%
State tax, net of Federal benefits		(4.28	)%		(4.30	)%
Permanent differences		0.21	%		0.07	%
Temporary differences		3.68	%		10.90	%
Change in valuation allowance		21,39	%		14.35	%
Effective tax rate		—	%		—	%

The Company’s income tax returns for 2019 through 2023 remain subject to examination by the Internal Revenue Services and state tax authorities.