Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.22.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Taxes  
Income Taxes

12.   Income Taxes

Prior to the Company’s Corporate Conversion, the Company operated as an Alabama limited liability company that passed through income and losses to its members. As a result, the Company was not subject to any U.S. federal or U.S. state income taxes as the related tax consequences are reported by the individual

members. Upon the Corporate Conversion, the Company converted to a Delaware corporation and is now subject to filing U.S. federal and various U.S. state income tax returns. The Company elected to adopt the accrual method of accounting for tax reporting purposes in its initial corporate returns for the period ended December 31, 2020. As the Company was incorporated in December 2020, all tax years of the Company remain open to examination by tax authorities. As of December 31, 2021, the Company has U.S. federal and state net operating loss carryforwards of approximately $17,956,000, which have an indefinite carryforward.

A reconciliation of the U.S. federal income tax rate to the Company’s effective tax rate is as follows:

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​

​

​

​

​

​

 

Year Ended

​

​

 

December 31, 

​

​

     

2021

     

2020

  

U.S. federal statutory income tax rate

​

21.00

%  

21.00

%

Permanent differences

 

(0.33)

%  

(1.56)

%

State taxes, net of federal benefit

 

4.47

%  

4.20

%

Deferred tax true-ups

​

(1.82)

%  

—

%

Other adjustments

​

0.15

%  

0.27

%

Change in valuation allowance

 

(23.47)

%  

(23.91)

%

Effective Income Tax rate

 

—

%  

—

%

​

Deferred taxes are recognized for temporary differences between the basis of assets and liabilities for financial statement and income tax purposes. The significant components of the Company’s deferred tax assets are comprised of the following:

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​

​

​

​

​

​

​

​

 

As of December 31, 

​

    

2021

    

2020

Deferred tax assets:

​

​

​

​

​

​

Net operating loss carryforwards

​

$

4,586,488

​

$

591,439

Stock compensation

​

 

1,338,234

​

 

1,310,207

Accrual to cash adjustments

​

 

—

​

 

314,492

Investment in partnership

​

​

30,593

​

​

31,136

Amortization

​

​

16,299

​

​

17,467

Gross deferred tax assets

​

 

5,971,614

​

 

2,264,741

Valuation allowance

​

 

(5,581,599)

​

 

(1,836,300)

Net deferred tax assets

​

​

390,015

​

​

428,441

​

​

​

​

​

​

​

Deferred tax liabilities:

​

​

​

​

​

​

Prepaid expenses

​

​

(390,015)

​

​

(428,441)

Deferred tax liabilities

​

​

(390,015)

​

​

(428,441)

​

​

​

​

​

​

​

Net deferred taxes

​

$

—

​

$

—

​

As of December 31, 2021, the Company has not generated sufficient positive evidence for future earnings to support a position that it will be able to realize its net deferred tax asset. The Company has significant negative evidence to overcome in the form of cumulative pre-tax losses from continuing operations since its formation, as well as projected losses for the current year. Therefore, it will continue to maintain a full valuation allowance on its U.S. federal and state net deferred tax asset. The change in the valuation allowance offset the income tax benefit related to the pre-tax loss for the year ended December 31, 2021. The Company does not have any material unrecognized tax benefits as of December 31, 2021.

The Company experienced a net change in valuation allowance of $3,745,299 and $1,387,078 for the years ended December 31, 2021 and 2020, respectively.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES Act”) Act was enacted and signed into law. The CARES Act included a number of income tax law changes, including modifications to the interest limitation under IRC §163(j) and reinstatement of the ability to carry back net operating losses. The income tax items in the CARES Act do not have an impact on the Company’s 2021 or 2020 income tax provision.