INCOME TAX

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAX

NOTE 13 - INCOME TAX

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted and signed into law in response to the market volatility and instability resulting from the COVID-19 pandemic. It includes a significant number of tax provisions and lifts certain deduction limitations originally imposed by the Tax Cuts and Jobs Act of 2017 (the “2017 Act”). The changes mainly related to: (1) the business interest expense disallowance rules for 2019 and 2020; (2) net operating loss rules; (3) charitable contribution limitations; (4) employee retention credit; and (5) the realization of corporate alternative minimum tax credits.

The Company continues to assess the impact and future implication of these provisions; however, it does not anticipate any amounts that could give rise to a material impact to the overall consolidated financial statements.

The provision for income tax expense for the years ended December 31, 2023 and 2022, consisted of the following: 

	2023			2022
Deferred tax (expense) benefit
US – Federal	$	(267,514	)	$	614,759
US – State		(56,051	)		128,807
Canada		(1,847,617	)		1,438,466
Total deferred tax (expense) benefit		(2,171,182	)		2,182,032
Valuation allowance		2,171,182			(2,182,032	)
Income tax expense	$	–		$	–

The following table sets forth a reconciliation of the statutory federal and state income tax for the fiscal years ended December 31, 2023 and 2022: 

	2023			2022
Income (loss) before tax	$	3,688,456		$	(8,531,020	)
Statutory tax rate		25.40%			25.40%
Income tax benefit computed at statutory rate		936,868			(2,166,879	)
Non-deductible expenditures and non-taxable revenues		(230,938	)		635,155
Impact of foreign tax rates and other		505,463			322,371
Adjustment to prior years provision versus statutory tax returns		959,789			(972,679	)
Change in valuation allowance		(2,171,182	)		2,182,032
Income tax expense	$	–		$	–

In December 2017, the United States (“U.S.”) Congress passed and the President signed into law what is referred to as the 2017 Tax Act, which contains many significant changes to the U.S. tax laws, including, but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21% and utilization limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017 to 80% of taxable income with an indefinite carryforward period. As the Company has a full valuation allowance against its U.S. deferred tax assets, the revaluation of net deferred tax assets resulting from the reduction in the U.S. federal corporate income tax rate did not impact the Company’s effective tax rate. Additional guidance may be issued by the U.S. Treasury Department, the IRS, or other standard-setting bodies, which may result in adjustments to the amounts recorded, including the valuation allowance. The Company is being audited by the IRS for years 2019 and 2020. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2023 and 2022, are as follows: 

	2023			2022
Deferred tax assets (liabilities)
Net operating loss carryforwards	$	23,857,401		$	24,239,960
Property and equipment		(7,081	)		(3,523	)
Intangible assets		–			736,720
Lease liability, net of right-of-use asset		12,705			107,147
Derivative liability		321,155			256,252
Other		20,005			279,622
Less: valuation allowance		(24,204,185	)		(25,616,178	)
Net deferred tax assets	$	–		$	–

As at December 31, 2023, the Company had approximately $93,000,000 of federal net operating loss carryforwards (“NOLS”) in the United States. State net operating loss carryforwards begin to expire in 2034. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s net operating loss carryforwards could be subject to annual limitations against taxable income in future periods which could substantially limit the eventual utilization of such carryforwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carryforward is subject to any IRC Section 382 limitation. To the extent there is a limitation, there could be a substantial reduction in the deferred tax asset with an offsetting reduction in the valuation allowance. As at December 31, 2023, the Company had approximately $900,000 of Canadian non-capital losses which begin to expire in 2037. As at December 31, 2023 and 2022, the Company has no unrecognized income tax benefits.

The tax years from 2014 and forward remain open to examination by federal and state authorities due to net operating loss and credit carryforwards. The Company is currently not under examination by the Internal Revenue Service or any other taxing authorities. Since the company has never been profitable, the Company has established a full valuation allowance against the deferred tax asset associated with the NOLS.