Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

    The components of the Company’s net deferred income taxes are as follows:

	December 31, 2023		December 31, 2022
Deferred tax assets:
Net operating loss carry forwards	$	26,467,531	$	24,821,633
Accrued expenses	196,209		368,384
Stock option and warrant expenses	371,921		618,478
Accounts receivable	49,140		38,454
Other	46,214		179,747
Total deferred tax assets	27,131,015		26,026,696
Valuation allowance	(27,105,825)		(25,919,144)
Net deferred tax assets	25,190		107,552
Deferred tax liabilities:
Fixed and tangible assets	(10,706)		(107,552)
Intangible assets	(409,130)		—
Total deferred tax liabilities	(419,836)		(107,552)
Total deferred tax assets (liabilities)	$	(394,646)	$	—

The Company continually evaluates the likelihood of the realization of deferred tax assets and adjusts the carrying amount of the deferred tax assets by the valuation allowance to the extent the future realization of the deferred tax assets is more likely than not. The Company considers many factors when assessing the likelihood of future realization of its deferred tax assets, including its recent cumulative earnings experience by taxing jurisdiction, expectation of future taxable income or loss, the carryforward periods available to the Company for tax reporting purposes, and other relevant factors.

As of December 31, 2023, based on the Company’s history of earnings and its assessment of future earnings, management believes that it is not likely that future taxable income will be sufficient to realize the deferred tax assets. Therefore, a valuation allowance has been applied against the deferred tax assets. The change in the valuation allowance for the twelve months ended December 31, 2023, was an increase of $1.2 million resulting primarily from net operating losses generated during the period. The change in the valuation allowance for the twelve months ended December 31, 2022, was an increase of $1.2 million, resulting primarily from net operating losses generated during the period. The Company has deemed any foreign earnings will be indefinitely reinvested.

Income tax benefit for the year ended December 31, 2023 and 2022 is as follows:

	Twelve Months Ended
	December 31, 2023		December 31, 2022
Current Expense (Benefit)
Federal	$	—	$	—
State	—		—
Foreign	—		—
Total	$	—	$	—
Deferred Expense (Benefit)
Federal	$	—	$	—
State	—		—
Foreign	(6,104)		—
Total	$	(6,104)	$	—

The following summary reconciles differences from taxes at the federal statutory rate with the effective rate:

	Twelve Months Ended
	December 31, 2023		December 31, 2022
Federal income tax at statutory rates	(21.0)	%	(21.0)	%
Change in deferred tax asset valuation allowance	17.8	%	23.2	%
Deferred state taxes	(3.0)	%	(3.3)	%
Provision to return	(0.7)	%	0.9	%
Stock compensation	5.7	%	(0.9)	%
Non-deductible expenses:
Parking, meals & entertainment	0.1	%	—	%
ISO & Restricted stock compensation	0.2	%	0.9	%
Change in state deferred rate	0.5	%	1.1	%
Other	0.5	%	(0.9)	%
Income taxes at effective rates	0.1	%	—	%

The Company has incurred net losses for tax purposes every year since its inception. As of December 31, 2023, the Company had approximately $99.6 million in net operating loss carryforwards for U.S. federal income tax purposes, $100.7 million in net operating loss carryforwards for state income tax purposes, and $1.5 million in net operating loss carryforwards for foreign tax purposes. Federal net operating loss carryforwards in the amount of $72.4 million have a finite carryforward

period and will begin expiring in 2026. Approximately $27.2 million of federal net operating loss carryforwards have an indefinite life. Federal net operating loss carryforwards generated after tax year 2017 are subject to an 80% limitation on taxable income, do not expire, and will carryforward indefinitely. State net operating loss carryforwards begin expiring in 2026. Foreign net operating losses begin expiring in 2038.

The utilization of the Company’s net operating losses are subject to a U.S. federal limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code and other similar limitations in various state jurisdictions. Such limitations may result in a reduction of the amount of net operating loss carryforwards in future years and possibly the expiration of certain net operating loss carryforwards before their utilization.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examinations by federal, foreign, and state and local jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from 2020 to the present in the U.S. and from 2020 to present in the Company's foreign operations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities to the extent utilized in a future period.

As required by the uncertain tax position guidance in ASC No. 740, Income Tax the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applied the uncertain tax position guidance in ASC No. 740, Accounting for Income to all tax positions for which the statute of limitations remained open. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors.