Sports Entertainment Gaming Global Corp Income Taxes Disclosure

10. Income Taxes

 

The Company’s pre-tax income (loss) by jurisdiction was as follows for the years ending December 31, 2022 and December 31, 2021;

 Schedule of Pre-tax Income (Loss) by Jurisdiction

		Year ended				Year ended
		December 31, 2022				December 31, 2021
Domestic		$	(58,379,329	)		$	(55,259,603	)
Foreign		$	(1,899,580	)			684,622
Total		$	(60,278,909	)		$	(54,574,981	)

 

The provision for income taxes for continuing operations for the year ended December 31, 2022 and 2021 consist of the following:

Schedule of Income Tax for Continuing Operations 

		Year ended December 31, 2022				Year ended December 31, 2021
Current income taxes			-
Federal			-				(16,846	)
State			104,356				5,578
Foreign			-				-
Total current income taxes			104,356				(11,268	)
Deferred income taxes
Federal			-				(1,757,535	)
State			-				-
Foreign			-				104,467
Total deferred income taxes			-				(1,653,067	)
Valuation allowance			-				-
Total income tax expense (benefit)			104,356				(1,664,335	)

 

 

A reconciliation between the amount of reported income tax expense (benefit) and the amount computed by multiplying income from continuing operations before income taxes by the statutory federal income tax rate is shown below. Income tax expense for the year ended December 31, 2022 includes state minimum taxes, permanent differences, and deferred tax assets for which a full valuation allowance has been placed. A corresponding tax expense is included for the year ended December 31, 2022 to reflect the increase in the valuation allowance.

 Schedule of Increase in the Valuation Allowance

		Year ended December 31, 2022				Year ended December 31, 2021
Tax Expense at statutory federal rate of 21%		$	(12,680,485	)		$	(11,460,747	)
State income taxes, net of federal income tax benefit			34,594				-
Foreign rate differential			(135,255	)			127,739
Permanent differences			37,919				2,106,611
Other – Miscellaneous			-				-
Change in valuation allowance			12,825,669				7,562,061
Income tax expense (benefit)		$	104,356			$	(1,664,335	)

 

Deferred income taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. The following table discloses those significant components of our deferred tax assets and liabilities, including any valuation allowance:

Schedule of Deferred Tax Assets and Liabilities 

		2022				2021
Long-term deferred tax assets:
Federal net operating loss carryforwards		$	24,838,785			$	20,145,126
Foreign net operating loss carryforwards			625,440				(321,330	)
Stock compensation			9,136,562				3,308,116
Fixed assets			-				-
Intangible assets			-				-
Other			19,540				19,540
Total deferred tax assets before valuation allowance		$	34,620,327			$	23,151,451
Deferred tax liabilities:
Fixed assets		$	(46,035	)		$	336,699
Intangible assets			478,213				1,452,273
Total deferred tax liabilities			432,178				1,788,972
Valuation allowance			(34,188,149	)			(21,362,480	)
Net deferred tax assets and liabilities		$	-			$	-

 

Due to the Global Gaming acquisition and the recording of related deferred tax liabilities, the Company released approximately $1,600,000 of valuation allowance since the additional deferred tax liabilities represent a future source of taxable income. For the year ended December 31, 2022, the valuation allowance increased by approximately $12,825,669. the Company believes a full valuation allowance against the net deferred tax asset is appropriate at this time. The Company will continue to evaluate the realizability of its deferred tax assets in future years.

 

 

At December 31, 2021, our carryforwards available to offset future taxable income consisted of federal net operating loss (“NOL”) carryforwards of approximately $116,408,640, $21,739,564 of which expires between 2036 and 2037 and $94,564,720 of which has no expiration date.

 

We account for uncertain tax positions in accordance with ASC 740-10-25, which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. We have not recorded any unrecognized tax benefits as of December 31, 2022.

 

Our practice is to recognize interest and penalties related to income tax matters in income tax expense in our consolidated statements of operations. We did not have any interest or penalties on unrecognized tax benefits accrued at December 31, 2022.

 

The Company files U.S. federal and state returns. The Company’s foreign subsidiary also files a local tax return in their local jurisdiction. From a U.S. federal, state and Mexican perspective the years that remain open to examination are consistent with each jurisdiction’s statute of limitations. The Company has not filed its 2021 and 2022 U.S. federal and state corporate income tax returns. The Company’s foreign subsidiary in Mexico is current with the filing of its tax returns through 2022. The Company expects to file these documents as soon as possible. While the Company is in a net loss position and expects no income tax amounts to be due except for minimum state and local income taxes, the Company is at risk for failure to file. As of the date of this Report, the Company has not been informed that such penalties have been assessed, therefore no accrual for such has been recorded in the Company’s financial statements. The Company’s federal income tax returns for the years 2017-2022 remain subject to examination by the Internal Revenue Service.