| BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The
accompanying unaudited condensed consolidated interim financial statements have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial statements and do not include all the information and footnotes required
by accounting principles generally accepted in the United States for complete financial statements. The information furnished reflects
all adjustments, consisting only of normal recurring items which are, in the opinion of management, necessary in order to make the financial
statements not misleading. The unaudited financial statements for the three and nine months ending September 30, 2022, are not necessarily
indicative of the results for the remainder of the fiscal year. The consolidated financial statements as of December 31, 2021, have been
audited by an independent registered public accounting firm. The accounting policies and procedures employed in the preparation of these
condensed consolidated financial statements have been derived from the audited financial statements of the “Company” for
the year ended December 31, 2021, which are contained in the Company’s annual report on Form 10-K as filed with the Securities
and Exchange Commission (the “SEC”) on March 31, 2022. The consolidated balance sheet as of December 31, 2021 was derived
from those financial statements. Basis
of Presentation and Principles of Consolidation The
consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America
(“US GAAP”). The consolidated financial statements of the Company include the Company and its wholly-owned subsidiaries,
Orbital Satcom Corp, Global Telesat Communications Ltd and NextPlat B.V. All material intercompany balances and transactions have been
eliminated in consolidation. . Description
of Business Overview Leveraging
the e-commerce experience of the Company’s management team and the Company’s existing e-commerce platforms, the Company has
embarked upon the rollout of a state-of-the-art e-commerce platform to collaborate with businesses to optimize their ability to sell
their goods online, domestically, and internationally, and enabling customers and partners to optimize their e-commerce presence and
revenue, which we expect will become the focus of the Company’s business in the future. Historically, the business of NextPlat
has been, the provision of a comprehensive array of Satellite Industry communication services, and related equipment sales. As detailed
in Online Storefronts and E-Commerce Platforms below, the Company operates two main e-commerce websites as well as 25 third-party e-commerce
storefronts such as Alibaba, Amazon and Walmart. These e-commerce venues form an effective global network serving thousands of consumers,
enterprises, and governments. NextPlat has announced its intention to broaden its e-commerce platform and is implementing comprehensive
systems upgrade to support this initiative. The Company has also begun the design and development of a next generation platform for digital
assets built for Web3 (an internet service built using decentralized blockchains). This new platform (“NextPlat Digital”)
is currently in the design and development phase and will enable the use of a range of digital assets, such as non-fungible tokens (“NFTs”),
in e-commerce and in community-building activities. Online
Storefronts and E-Commerce Platforms We
operate two e-commerce websites offering a range of MSS products and solutions through our subsidiaries, Orbital Satcom, which targets
customers in North and South America, and GTC which targets customers in the UK, EU, Middle East, Asia and rest of the world. These websites
produce sales and attract enquiries from customers and potential customers from all around the world. Over the long term, we plan to
develop additional country-specific websites to target customers in South America, Asia and Europe where we anticipate there will be
substantial further demand for our products. In
addition to our two main e-commerce websites, we make portable satellite voice, data and tracking solutions easier to find and buy online
through our various third-party e-commerce storefronts such as Alibaba, Amazon and Walmart. We currently operate 25 storefronts across
various countries in 5 continents. We have invested in personnel to translate our listings correctly in the different countries we are
represented in and intend to regularly improve and increase our listings on all e-commerce sites. We currently have more than 9,000 product
listings on all third-party sites and invest significantly in inventory to hold at Amazon’s various fulfillment centers around
the world to ensure that orders are shipped to customers as quickly as possible. The products include handheld satellite phones, personal
and asset tracking devices, portable high-speed broadband terminals, and satellite Wi-Fi hotspots. Our Amazon Marketplaces represented
approximately 52.3 %
and 64.0 %
of the Company’s revenues during the nine months ended September 30, 2022 and 2021, respectively. For the years ended December
31, 2021 and 2020, Amazon online marketplaces represented approximately 63.6 %
and 73.3 %
of total sales, respectively. We anticipate that these marketplaces will continue to represent a significant portion of our sales for
the foreseeable future. Our e-commerce storefronts enable us to attract a significantly diversified level of sales from all over the
world, ensuring we are not overly reliant on any single market or sector for our sales revenue. Furthermore, many products we sell require
subscription-based services which allow us to increase our recurring revenue airtime sales. NEXTPLAT
CORP AND SUBSIDIARIES FKA:
ORBSAT CORP NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Communications
Services Through
our Global Telesat Communications Ltd and Orbital Satcom Corp business units, we provide Mobile Satellite Services (“MSS”)
solutions to fulfill the growing global demand for satellite-enabled voice, data, personnel and asset tracking, Machine-to-Machine (M2M)
and Internet of Things (IoT) connectivity services. We provide these solutions for businesses, governments, military, humanitarian organizations,
and individual users, enabling them to communicate, connect to the internet, track and monitor remote assets and lone workers, or request
SOS assistance via satellite from almost anywhere in the world, even in the most remote and hostile of environments. We
provide voice, data communications, IoT and M2M services via Geostationary and Low Earth Orbit (“LEO”) satellite constellations
and offer reliable connectivity in areas where terrestrial wireless or wireline networks do not exist or are limited, including remote
land areas, open ocean, airways, the polar regions and regions where terrestrial networks are not operational, for example due to political
conflicts and natural or man-made disasters. We
have expertise and long-term experience in providing tracking and monitoring services via satellite, specifically through the Globalstar
Low Earth Orbit satellite network. We own unique network infrastructure devices, known as appliqués, which are located in various
Globalstar ground stations around the world and provide the signal receipt and processing technology that enables and powers the Globalstar
simplex data service. Our ownership of these appliqués provides us with competitive access to the global simplex data service
which addresses the market demand for a small and cost-effective solution for sending data, such as geographic coordinates, from assets
or individuals in remote locations to a central monitoring station and is used in numerous applications such as tracking vehicles, asset
shipments, livestock, and monitoring unattended remote assets. In addition, we also provide tracking and monitoring solutions using Automatic
Identification System (AIS), 2G-5G, Push-to-Talk and two-way radio technology. We
generate revenue from both the provision of services and the sale of equipment. Higher margin recurring service revenue from the sale
of monthly, annual, and prepaid airtime or messaging plans has historically represented an increasing proportion of our revenue, and
we expect that trend to continue as we introduce new products requiring associated airtime or messaging plans. We
provide our products and services directly to end users and reseller networks located both in the United States and internationally through
our subsidiaries, U.S. based Orbital Satcom Corp (“Orbital Satcom”) and U.K. based Global Telesat Communications Limited
(“GTC”). We have a physical presence in the United States and the United Kingdom, as well as an ecommerce storefront presence
in 16 countries across 5 continents. We have a diverse geographical customer base having provided solutions to more than 50,000 customers
located in more than 165 countries across most every continent in the world. MSS
Products Our
MSS products rely on satellite networks for voice, data and tracking connectivity and thus are not reliant on cell towers or other local
infrastructure. As a result, our MSS solutions are suitable for recreational travelers and adventurers, government and military users,
and corporations and individuals wishing to communicate or connect to the internet from remote locations, or in the event of an emergency
such as a power outage, following a hurricane or other natural disaster during which regular cell phone, telephone and internet service
may not be available. Our
satellite communications products enable users to make voice calls, send and receive text messages and emails, and transmit GPS location
coordinates from virtually anywhere on the planet, no matter how remote the location and regardless of the availability of local communication
infrastructure. Our range of satellite data products allow users around the world to connect to the internet, stream live video, and
communicate via voice and data applications. NEXTPLAT
CORP AND SUBSIDIARIES FKA:
ORBSAT CORP NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS We
are a provider of GPS enabled emergency locator distress beacons that can save lives, on land and at sea. Our distress beacons enable
essential communication between our customers and search and rescue organizations during emergency situations and pinpoint locational
information to Search and Rescue services, essential during an emergency. We
provide a wide range of satellite tracking devices used to monitor the location, movements, and history of almost anything that moves.
We specialize in offering satellite tracking services through the Globalstar satellite network and have supplied tens of thousands of
tracking devices which are used around the world to locate lone workers, track shipping containers, livestock, vehicles, and vessels
along with many other types of assets. The
first product launched by the Company, SolarTrack, is a compact, lightweight, IoT tracking device powered by the sun and operating on
one of the most modern satellite networks in the world. It is designed for tracking and monitoring anything that moves, or any remote
asset used outdoors, almost anywhere in the world and we anticipate strong demand from customers looking for a low cost, low maintenance
tracking device to monitor remote assets. Mapping
and Tracking Portal Our
advanced subscription-based mapping and tracking portal, GTCTrack, is available for use by registered customers who pay a monthly fee
to access it. This mapping portal provides a universal and hardware-agnostic, cloud-based data visualization and management platform
that allows managers to track, command, and control assets in near-real-time. Asset location reports including position, speed, altitude,
heading and past location and movement history reports for a wide range of tracking devices and other products sold by us are available
through GTCTrack. Organizational
History The
Company was originally incorporated in 1997 in Florida. On April 21, 2010, the Company merged with and into a wholly-owned subsidiary
for the purpose of changing its state of incorporation to Delaware, effecting a 2:1 forward split Global
Telesat Communications Limited (“GTC”) was formed under the laws of England and Wales in 2008. On February 19, 2015, we entered
into a share exchange agreement with GTC and all of the holders of the outstanding equity of GTC pursuant to which GTC became a wholly
owned subsidiary of ours. On
March 28, 2014, we merged with a newly-formed wholly-owned subsidiary of ours solely for the purpose of changing our state of incorporation
to Nevada from Delaware, effecting a 1:150 A
wholly owned subsidiary, Orbital Satcom Corp. (“Orbital Satcom”), a Nevada corporation was formed on November 14, 2014. On
January 22, 2015, we changed our name to “Orbital Tracking Corp” from “Great West Resources, Inc.” pursuant to
a merger with a newly formed wholly owned subsidiary. Effective
March 8, 2018, following the approval of a majority of our shareholders, we effected a reverse split of our common stock at a ratio of
1 for 150 reverse split of our common stock at a ratio of 1 for 15 Also,
on August 19, 2019, we changed our name to “Orbsat Corp” from “Orbital Tracking Corp.” pursuant to a merger with
a newly formed wholly owned subsidiary. NEXTPLAT
CORP AND SUBSIDIARIES FKA:
ORBSAT CORP NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS On
March 24, 2021, the Company’s shareholders via majority shareholder consent authorized a stock split not to exceed 1 for 5 reverse
stock split. A definitive Information Statement relating to the shareholder consent was filed with the SEC on March 13, 2021. The Company’s
Board of Directors subsequently approved a 1-for-5 reverse stock split. The Company filed a Certificate of Change to its Amended and
Restated Articles of Incorporation to effect a reverse stock split of its issued and outstanding common stock, at a ratio of 1-for-5 On
January 18, 2022, the Company filed a Certificate of Amendment of the Amended and Restated Articles of Incorporation of the Company with
the Secretary of State of the State of Nevada in order to change the Company’s corporate name from Orbsat Corp to NextPlat Corp.
This name change was effective as of January 21, 2022. The name change was approved by the Company’s stockholders at the 2021 annual
meeting of stockholders held on December 16, 2021. On
June 22, 2022, the Company formed NextPlat B.V., a Netherlands limited liability company, as a wholly-owned subsidiary. At present, NextPlat
B.V., has no active operations. On
September 2, 2022, the Company closed a transaction with Progressive Care Inc. (OTCQB: RXMD) (“Progressive Care”), pursuant to which
we purchased 3,000 2,000 6 Each
share of Series B Preferred Stock votes as a class with the common stock of Progressive Care, and has 100,000 100,000 2,000 Following
the consummation of the Unit Purchase, our Chairman and Chief Executive Officer, Charles M. Fernandez, and our board member, Rodney
Barreto, were appointed to Progressive Care’s Board of Directors, with Mr. Fernandez appointed to serve as Chairman of
Progressive Care’s Board of Directors and Mr. Barreto appointed to serve as a Vice Chairman of Progressive Care’s Board
of Directors. On November 11, 2022, the Progressive Care board of directors elected Mr.
Fernandez to serve as the Chief Executive Officer of Progressive Care. In
addition, on September 2, 2022, NextPlat, Charles Fernandez, Rodney Barreto and certain other purchasers purchased from Iliad Research
and Trading, L.P. (“Iliad”) a Secured Convertible Promissory Note, dated March 6, 2019, made by Progressive Care to Iliad
(the “Note”). The accrued and unpaid principal and interest under the note at the time of the purchase was approximately
$ 2.79 2.3 1 400,000 In
connection with the Note Purchase, NextPlat, Messrs. Fernandez and Barreto and the other purchasers of the Note entered into a Debt Modification
Agreement with Progressive Care. Pursuant to the Debt Modification Agreement, the interest rate under the Note was reduced from 10 5 0.02 21,000,000 9,130,435 3,652,174 3,652,174 All
information presented in this Quarterly Report on Form 10-Q other than in Company’s consolidated financial statements and the
notes thereto assumes a 1-for-5 reverse stock split NEXTPLAT
CORP AND SUBSIDIARIES FKA:
ORBSAT CORP NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Use
of Estimates In
preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts
of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended.
Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to,
the assumptions used to calculate stock-based compensation, derivative liabilities and common stock issued for services. Reclassification Certain
prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications had no effect on
the reported results of operations. Cash
and Cash Equivalents The
Company considers all highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. The
Company places its cash with a high credit quality financial institution. The Company’s account at this institution is insured
by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 250,000 11,884,437 Accounts
receivable and allowance for doubtful accounts The
Company has a policy of reserving for questionable accounts based on its best estimate of the amount of probable credit losses in its
existing accounts receivable. The Company periodically reviews its accounts receivable to determine whether an allowance is necessary
based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account
balances deemed to be uncollectible are offset against sales and relieved from accounts receivable, after all means of collection have
been exhausted and the potential for recovery is considered remote. As of September 30, 2022, and December 31, 2021, there were no allowances
for doubtful accounts. NEXTPLAT
CORP AND SUBSIDIARIES FKA:
ORBSAT CORP NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Inventories Inventories
are valued at the lower of cost or net realizable value, using the first-in first-out cost method. The Company assesses the valuation
of its inventories and reduces the carrying value of those inventories that are obsolete or in excess of the Company’s forecasted
usage to their estimated net realizable value. The Company estimates the net realizable value of such inventories based on analysis and
assumptions including, but not limited to, historical usage, expected future demand and market requirements. A change to the carrying
value of inventories is recorded to cost of goods sold. Prepaid
expenses Prepaid
expenses amounted to $ 109,765 146,935 Investments The
Company applies the equity method of accounting to investments when it has significant influence, but not controlling interest, in the
investee. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership
interest, representation on the board of directors, participation in policy-making decisions and material intercompany transactions.
The carrying value of our equity method investment is reported as “equity method investment” on the condensed consolidated
balance sheets. The Company’s equity method investment is reported at cost and adjusted each period for the Company’s share
of the investee’s income or loss and dividend paid, if any. The Company’s proportionate share of the net loss resulting from
these investments is reported under the line item captioned “equity in net loss of affiliate” in the condensed consolidated
statements of operations and comprehensive loss. Note 7 contains additional information on the equity method investment. The
Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment
may not be recoverable. Management reviewed the underlying net assets of the investees as of September 30, 2022 and determined that the
Company’s proportionate economic interest in the investees indicate that the investments were not impaired. Foreign
Currency Translation The
Company’s reporting currency is U.S. Dollars. The accounts of one of the Company’s subsidiaries, GTCL, is maintained using
the appropriate local currency, Great British Pound, as the functional currency. All assets and liabilities are translated into U.S.
Dollars at balance sheet date, shareholders’ equity is translated at historical rates and revenue and expense accounts are translated
at the average exchange rate for the year or the reporting period. The translation adjustments are reported as a separate component of
stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange
rate fluctuations on transactions denominated in a currency other than the functional currency are included in the statements of operations. The
relevant translation rates are as follows: for the three and nine months ended September 30, 2022, closing rate at 1.1150 1.176596 1.258384444 1.342642 1.3784972 1.3853499 1.353372 1.375083 Revenue
Recognition and Unearned Revenue The
Company recognizes revenue from satellite services when earned, as services are rendered or delivered to customers. Equipment sales revenue
is recognized when the equipment is delivered to and accepted by the customer. Only equipment sales are subject to warranty. Historically,
the Company has not incurred significant expenses for warranties. Equipment sales which have been prepaid, before the goods are shipped
are recorded as contract liabilities and once shipped is recognized as revenue. The Company also records as contract liabilities, certain
annual plans for airtime, which are paid in advance. Once airtime services are incurred, they are recognized as revenue. Unbilled revenue
is recognized for airtime plans whereby the customer is invoiced for its data usage the following month after services are incurred. The
Company’s customers generally purchase a combination of our products and services as part of a multiple element arrangement. The
Company’s assessment of which revenue recognition guidance is appropriate to account for each element in an arrangement can involve
significant judgment. This assessment has a significant impact on the amount and timing of revenue recognition. NEXTPLAT
CORP AND SUBSIDIARIES FKA:
ORBSAT CORP NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) The
Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration
which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company
determines are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify
the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance
obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. The five-step model is applied
to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services transferred
to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, we assess the goods or services
promised within each contract and determine those that are performance obligations and assess whether each promised good or service is
distinct. We then recognize revenue in the amount of the transaction price that is allocated to the respective performance obligation
when (or as) the performance obligation is satisfied. In
accordance with ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedient Contract
liabilities is shown separately in the unaudited condensed consolidated balance sheets as current liabilities. At September 30, 2022
and December 31, 2021, we had contract liabilities of approximately $ 35,009 36,765 Cost
of Product Sales and Services Cost
of sales consists primarily of materials, airtime and overhead costs incurred internally and amounts incurred to contract manufacturers
to produce our products, airtime and other implementation costs incurred to install our products and train customer personnel, and customer
service and third-party original equipment manufacturer costs to provide continuing support to our customers. There are certain costs
which are deferred and recorded as prepaids, until such revenue is recognized. Refer to revenue recognition above as to what constitutes
deferred revenue. Shipping
and handling costs are included as a component of costs of product sales in the Company’s consolidated statements of operations
because the Company includes in revenue the related costs that the Company bills its customers. Intangible
assets Intangible
assets include customer contracts purchased and recorded based on the cost to acquire them. These assets are amortized over 10 NEXTPLAT
CORP AND SUBSIDIARIES FKA:
ORBSAT CORP NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Property
and equipment Property
and equipment are carried at historical cost less accumulated depreciation. Depreciation is based on the estimated service lives of the
depreciable assets and is calculated using the straight-line method. Expenditures that increase the value or productive capacity of assets
are capitalized. Fully depreciated assets are retained in the property and equipment, and accumulated depreciation accounts until they
are removed from service. When property and equipment are retired, sold or otherwise disposed of, the asset’s carrying amount and
related accumulated depreciation are removed from the accounts and any gain or loss is included in operations. Repairs and maintenance
are expensed as incurred. Leasehold improvements have an estimated service life of the term of the respective lease. The
estimated useful lives of property and equipment are generally as follows: SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT
Years
Office furniture and fixtures 4
Computer equipment 4
Rental equipment 4
Leasehold improvements 5
Appliques 10
Website development 2 Impairment
of long-lived assets The
Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the
assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted
future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the periods
ended September 30, 2022 and September 30, 2021, respectively. Accounting
for Derivative Instruments Derivatives
are required to be recorded on the balance sheet at fair value. These derivatives, including embedded derivatives in the Company’s
structured borrowings, are separately valued and accounted for on the Company’s balance sheet. Fair values for exchange traded
securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined
using market-based pricing models incorporating readily observable market data and requiring judgment and estimates. The
Company did not identify any assets or liabilities that are required to be presented on the consolidated balance sheets at fair value
in accordance with the accounting guidance. The carrying amounts reported in the balance sheet for cash, accounts payable, and accrued
expenses approximate their estimated fair market value based on the short-term maturity of the instruments. NEXTPLAT
CORP AND SUBSIDIARIES FKA:
ORBSAT CORP NOTES
TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS NOTE
1 – BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Stock
Based Compensation Stock-based
compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the
consolidated financial statements of the cost of employee and director services received in exchange for an award of equity instruments
over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period).
The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date
fair value of the award. The
Company records stock-based payments made to non-employees in accordance with Accounting Standards Update (“ASU”) 2018-07, Compensation-Stock
Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, Income
Taxes The
Company accounts for income taxes pursuant to the provision of ASC 740-10, “Accounting for Income Taxes” (“ASC 740-10”)
which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach
require the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between
the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets
for which management believes it is more likely than not that the net deferred asset will not be realized. The
Company follows the provision of ASC 740-10 related to Accounting for Uncertain Income Tax Positions. When tax returns are filed, there
may be uncertainty about the merits of positions taken or the amount of the position that would be ultimately sustained. In accordance
with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which,
based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination,
including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax
positions that meet the more likely than not recognition threshold is measured at the largest amount of tax benefit that is more than
50 percent likely of being realized upon settlement with the applicable taxing authority The
Company believes its tax positions are all more likely than not to be upheld upon examination. As such, the Company has not recorded
a liability for uncertain tax benefits. The
Company has adopted ASC 740-10-25, “Definition of Settlement,” which provides guidance on how an entity should determine
whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a
tax position can be effectively settled upon the completion and examination by a taxing authority without being legally extinguished.
For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position
is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations
remains open. The federal and state income tax returns of the Company are subject to examination by the IRS and state taxing authorities,
generally for three years after they are filed. Leases Effective
January 1, 2019, the Company accounts for its leases under ASC 842, Leases In
calculating the right of use asset and lease liability, the Company has elected to combine lease and non-lease compo |
