Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 8 – Income Taxes

Income tax expense consisted of the following:

	December 31,
	2021			2020
Current
Federal	$	-		$	-
State		34,317			34,951
Sub-total		34,317			34,951
Deferred
Federal		(1,208,287	)		(813,189	)
State		(6,820	)		(23,314	)
Sub-total		(1,215,107	)		(836,503	)
Total income tax	$	(1,180,790	)	$	(801,552	)

For the years ended December 31, 2021 and 2020, the effective income tax rate of 12.91% and (61.08%), respectively, differs from the federal statutory rate of 21% primarily due to the effect of state income taxes, expenses not deductible for income tax purposes and recognition of benefits accruing due to start-up costs of the Company incurred for the period prior to the Business Combination. The Company’s effective income tax rate reconciliation is as follows.

	December 31,
	2021			2020
Federal statutory rate		21.00	%		21.00	%
Permanent items		(5.27	)%		48.70	%
State and local taxes, net of federal taxes		(0.16	)%		1.91	%
Deferred rate changes		0.00	%		0.08	%
Other		(2.66	)%		(132.77	)%
		12.91	%		(61.08	)%

The components of the Company’s net deferred tax (liabilities)/assets consisted of the following at:

	December 31,
	2021			2020
Inventory capitalization	$	1,400		$	2,100
Allowance for doubtful accounts		108,000			107,400
Accrued expenses		181,500			110,400
Stock compensation		225,600			-
Net operating loss carryforward		1,717,400			613,700
Accumulated depreciation		(2,362,800	)		(2,428,200	)
Deferred revenue		867,900			1,027,200
Start-up costs		1,575,907			1,667,200
Deferred tax assets, net	$	2,314,907		$	1,099,800

As of December 31, 2021, the Company had $8,173,388 in federal net operating losses (“NOL”), all remaining from 2019 and onwards and accordingly available to offset future taxable income indefinitely, however they are subject to an 80% of taxable income limitation for all periods after January 1, 2021. It is possible that Internal Revenue Code (IRC) Section 382 may apply to these losses and limit their ability to be used in future periods. The analysis thereof has not yet been performed. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in the United States. The CARES Act contains several tax provisions, including modifications to the NOL and business interest limitations as well as a technical correction to the recovery period for qualified improvement property. The Company has evaluated these provisions in the CARES Act and does not expect a material impact to its tax provision, except for the 80% of taxable income limitation on the future utilization of the Company’s NOLs.

The Business Combination consummated on November 20, 2020 was treated as a double-merger for tax reporting purposes. For tax purposes, Onyx filed a short period final return for the year ended November 20, 2020 and the Company filed a full calendar year return for the year ended December 31, 2020. For purposes of Section 382 of the Internal Revenue Code, the Company expects that all tax attributes will continue to be available as more than 50% of its equity continued to be held by the original shareholders of Onyx.

The Company does not currently anticipate any significant increase or decrease of the total amount of unrecognized tax benefits within the next twelve months.

None of the Company’s U.S. federal or state income tax returns are currently under examination by the Internal Revenue Service (the “IRS”) or state authorities. However, fiscal years 2017 and later remain subject to examination by the IRS and respective states.