Income Taxes

3 Months Ended

12 Months Ended

Mar. 31, 2023

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 9 – Income Taxes

Deferred tax assets and liabilities are recognized based on temporary differences in financial statements and income tax carrying values using rates in effect for years such differences are to reverse. Due to uncertainties surrounding the Company’s ability to generate future taxable income and consequently realize such deferred income tax assets, a full valuation allowance has been established.

The disclosures regarding deferred tax assets included in our 2022 Form 10-K continue to be accurate for the three months ended March 31, 2023.

The Company does not currently anticipate any significant increase or decrease in 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.

Note 10 – Income Taxes

Income tax expense (benefit) consisted of the following:  

	December 31,
	2022		2021
Current
Federal	$	-	$	-
State		27,446		34,317
Subtotal		27,446		34,317
Deferred
Federal		2,305,034		(1,208,287	)
State		10,037		(6,820	)
Subtotal		2,315,071		(1,215,107	)
Total income tax expense (benefit)	$	2,342,517	$	(1,180,790	)

For the years ended December 31, 2022 and 2021, the effective income tax rate of (20.4)% and 12.91% respectively, differs from the federal statutory rate of 21% primarily due to change in the valuation allowance and 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,
	2022			2021
Federal statutory rate		21.00	%		21.00	%
Permanent items		(4.94	)%		(5.27	)%
State and local taxes, net of federal taxes		0.00	%		(0.16	)%
Deferred rate changes		(0.02	)%		0.00	%
Change in valuation allowance		(33.88	)%		-
Other		(2.56	)%		(2.66	)%
		(20.4	)%		12.91	%

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

	December 31,
	2022			2021
Allowance for doubtful accounts	$	108,000		$	108,000
Accrued expenses		259,000			181,500
Stock compensation		42,400			225,600
Net operating loss carryforward		3,757,700			1,717,400
Accumulated depreciation		(1,320,700	)		(2,362,800	)
Deferred revenue		573,500			867,900
Lease liability		229,300			-
Other miscellaneous items		35,900			1,400
Right-of-use asset		(229,300	)		-
Start-up costs		1,462,700			1,575,907
Total deferred tax assets		4,918,500			2,314,907
Valuation allowance		(4,918,500	)		-
Deferred tax assets, net	$	-		$	2,314,907

As of December 31, 2022, the Company had $17,034,462 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 in 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 2018 and later remain subject to examination by the IRS and respective states.