Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes

Note 13 – Income Taxes

 

The provision for income taxes for the years ended December 31, 2023 and 2022 consists of the following:

 

    Year Ended December 31,
2023		     Year Ended December 31,
2022		  
Current                
Federal   $ -     $ (301,766 )
State     (239,834 )     (11,083 )
Total Current     (239,834 )     (312,849 )
                 
Deferred                
Federal     -       -  
State     -       -  
Total Deferred     -       -  
                 
Provision for income taxes   $ (239,834 )   $ (312,849 )

 

The following reconciles the Federal statutory income tax rate to the Company’s effective tax rate for the years ended December 31, 2023 and 2022:

 

    Year Ended December 31,
2023		     Year Ended December 31,
2022		  
    %     %  
Federal statutory rate     21.0 %     21.0 %
Permanent and other items     15.0       (17.0 )
Federal income taxes audit and other adjustments     -       -  
Change in valuation allowance     (39.2 )     (14.5 )
 Effective income tax rate     (3.2) %     (10.5 )%

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on Management’s evaluation, it is more likely than not that the deferred tax asset will not be realized and as such a valuation allowance has been recorded as of December 31, 2023 and 2022.

 

Deferred tax assets and liabilities are comprised of the following at December 31, 2023 and 2022:

 

    December 31,
2023		     December 31,
2022		  
Deferred income tax assets:                
Amortization   $ 233,410     $ 375,821  
Net operating loss carryforward     17,668,228       15,445,916  
Allowance for doubtful accounts     393,001       387,818  
Charitable contributions     -       644  
Stock options     -       1,003,453  
Accrued liabilities     5,121,508       1,826,839  
HHS Provider Relief Funds     37,845       67,685  
Employee retention credit     -       292,282  
HTS and AMSG basis difference     -       878,709  
Deferred state tax asset     4,043,616       4,089,682  
Total deferred income tax assets     27,497,608       24,368,849  
Deferred income tax liabilities:                
Right-of-use asset     (93,875 )     -  
Depreciation     (670,176 )     (583,812 )
Deferred tax asset, net     26,733,557       23,785,037  
                 
Less: valuation allowance     (26,733,557 )     (23,785,037 )
                 
Net deferred tax assets   $ -     $ -  

 

 

Management has reviewed the provisions regarding assessment of its valuation allowance on deferred tax assets and based on that criteria determined that it should record a valuation allowance of $26.7 million and $23.8 million against its net deferred tax assets as of December 31, 2023 and 2022, respectively. The Company has federal net operating loss carryforwards totaling approximately $84.1 million generated since 2016. It also has various state net operating loss carryforwards that begin to expire in 2033. The Company believes that a Section 382 limitation may exist for a portion of its net operating losses but at this time has not identified to which losses these limitations would relate.

 

At December 31, 2023, the Company had federal income tax receivables of $0.8 million and federal tax liabilities of $0.7 million and it had state tax liabilities totaling $0.9 million.

 

The Company recognizes the consolidated financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than–not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

The Company is subject to income taxes in the U.S. federal jurisdiction and Tennessee. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply.