Deferred Taxes

12 Months Ended

Dec. 31, 2023

Deferred Taxes [Abstract]

DEFERRED TAXES

NOTE 18. DEFERRED TAXES

Income tax expense was $187,848 and $204,917 for the years ended December 31, 2023 and 2022, respectively.

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2023 and 2022 are shown below. A valuation allowance has been established as realization of such net deferred tax assets has not met the more likely-than-not threshold requirement. If the Company’s judgment changes and it is determined that the Company will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction to income tax expense.

As of December 31, 2023 and 2022, the Company had federal operating loss carryforwards of approximately $25.6 million and $32.1 million, respectively, and $42.1 and $41.1 million of state net operating loss carryforwards, respectively. Of the current net operating loss carryforwards, $25.8 million expire starting in 2034 through 2043, and $41.9 million do not expire. The Company has evaluated ownership changes pursuant to IRC Sections 382 and 383.  The annual Section 382 base limit is approximately $461 thousand. The additional deemed RBIG pursuant to Notice 2003-65 is approximately $2 million per year for a 5-year recognition period through December 31, 2026.

The components of net deferred tax assets and liabilities are as follows:

	December 31,
	2023			2022
Deferred tax assets:
Net operating loss carryforwards	$	6,847,158		$	8,563,430
Equity-based instruments		295,746			366,007
Long-lived assets and other		17,202			(46,324	)
Capital loss carryforward		—			97,868
Total deferred tax assets		7,160,106			8,980,981
Deferred tax liabilities:
Intangible assets		(338,428	)		(566,853	)
Total deferred tax liabilities		(338,428	)		(566,853	)
Valuation allowance	$	(6,821,678	)	$	(8,414,128	)
Net deferred tax asset		—			—

A reconciliation of our income tax provision and the amounts computed by applying statutory rates to income before income taxes is as follows:

	December 31,
	2023			2022
Income tax benefit at statutory rate	$	(1,488,439	)	$	(1,946,731	)
State income tax benefit, net of Federal benefit		360,526			—
280E Disallowance		1,751,278			1,834,141
Equity-based instruments		—			14,180
Fair market value adjustment/loss on extinguishment – derivative liabilities		(166	)		65,231
Amortization of debt discount		170,462			376,895
Goodwill and intangible impairment		248,010			573,262
Non-taxable cancellation of debt income		617,200			—
Other		121,427			107,608
Valuation allowance		(1,592,450	)		(819,669	)
	$	187,848		$	204,917