Income Taxes |
12 Months Ended |
|---|---|
Dec. 31, 2024 | |
| Income Taxes | |
| Income Taxes | Note 8: Income Taxes
The Company had deferred tax assets, as a result of prior operating losses, of $3.4 million at December 31, 2023 and $3.5 million at December 31, 2024. The net operating loss carry-forward is approximately $14.7 million to be used to offset otherwise taxable income in the future. The net operating loss carry-forward would indicate a deferred asset of $3.5 million compared to $3.4 million at December 31, 2023, therefore net income tax benefit of $157,000 was recorded in 2024 as it was offset fully against net operating losses at a tax rate of 24%. Only immaterial temporary differences were noted. The net operating losses were generated primarily in the transition the Company made from its original free-standing locations to the more modern Craft Pizza & Pub style locations. In addition, the Company transformed as a major franchisor of non-traditional locations (which are defined as locations within some other type business or activity). Formerly net operating losses not used expired after 20 years. The remaining carry-forward is indefinite but they can only be used to offset up to 80% of the otherwise taxable income in any one tax year, however the unused net operating loss carry-forward continues to be carried forward for future years. As with any other asset, the Company is required to evaluate whether or not that tax credit is more likely than not to be used in coming years. The Company has made this evaluation and determined that the deferred tax credit recorded will more likely than not be used within the next four years. The deferred tax asset is based on the statutory tax rate based on current tax law for State and Federal income taxes of 24%. According to the internal projections made by the Company, the net operating loss carry-forward will be fully utilized to offset income taxes in future years. Should there be a significant change in the Company’s ownership, the Company’s future use of its existing net operating losses may be limited.
The Company has deferred tax asset of approximately $3.5 million for both state and Federal taxes at the assumed effective tax rate of 24% combined. This deferred asset will be used to cover the taxes on future years taxable income in the amount of approximately $14.7 million. The Company also has deferred tax asset recorded as deferred contract cost in the approximate amount of $1.6 million which is being amortized into operating costs over the life of the franchise agreements, which for the most part is ten years after the location opens for business.
The Company has deferred contract income in the approximate amount of $1.6 million to be amortized into income over the term of the franchise agreement, which for the most part is ten years after the location opens. The Company also has deferred tax liability for the estimated warrant value recorded as approximately $539,000 on December 31, 2024. The $539,000 value has not been deducted as an expense in determining the loss carryforward. |