Income Taxes

12 Months Ended

Dec. 31, 2022

Income Taxes [Abstract]

Income Taxes

18. Income Taxes

A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate consist of the following:

	For the Years Ended December 31,
	2022			2021
Statutory federal income tax benefit		21.00	%		21.00	%
Permanent items		0.56	%		(2.71	)%
State taxes, net of federal tax benefit		7.77	%		5.99	%
Effects of Rates Different from Statutory		0.17	%		(0.06	)%
Rate Change		0.01	%		0.00	%
Other		(3.64	)%		(0.71	)%
Change in valuation allowance		(54.94	)%		(20.98	)%
Income tax (benefit)/provision		(29.07	)%		2.53	%

The components of income tax provision (benefit) are as follows:      

	For the Years Ended December 31,
	2022			2021
Current:
Federal	$	1,493,772		$	295,956
State and local		502,872			319,741
Foreign		-			-
	$	1,996,644		$	615,697
Deferred:
Federal	$	(7,683,475	)	$	-
State and local		(2,649,791	)		-
Foreign		375,301			-
		(9,957,965	)		-
Total income tax (benefit) expense	$	(7,961,321	)	$	615,697

Deferred income taxes reflect the net tax effects of temporary differences between the carrying value of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. The temporary differences that give rise to deferred tax assets and liabilities are as follows:      

	For the Years Ended December 31,
	2022			2021
Deferred tax assets (liabilities):
Net operating loss carryforwards	$	11,523,632			17,153,341
Allowance for doubtful accounts		893,329			874,029
Amortization		(157,839	)		(582,284	)
Prepaid expenses		(994,644	)		(411,798	)
Property and equipment		(2,798,988	)		(2,245,003	)
Research and development expense		303,446			(580,497	)
Accrued bonus		(184,724	)		1,414,357
Stock compensation		2,780,019			883,317
Other		114,080			197,218
Net deferred tax assets		11,478,311			16,702,680
Valuation allowance		(1,520,345	)		(16,702,680	)
Deferred tax assets, net of allowance	$	9,957,966		$	-

The Company has determined, based upon available evidence, that it is more likely than not that all of the net deferred tax asset will not be realized and, accordingly, has provided a partial and a full valuation allowance against its net deferred tax asset as of December 31, 2022 and 2021, respectively. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, net operating loss carryback potential, and tax planning strategies in making these assessments.

As of December 31, 2022 and 2021, the Company had federal net operating loss carryforwards of approximately $35,289,184 and $53,573,046, respectively. As of December 31, 2022 and 2021, the Company had approximately $1,520,345 and $202,965 of foreign net operating loss carryforwards, respectively. As of December 31, 2022 and 2021, the Company had state net operating loss carryforward of approximately $2,592,560 and $67,229,895, respectively. The federal net operating loss carryforwards generated after December 31, 2017 of $35,289,184 carry forward infinitely. State and foreign net operating loss carryforwards generated in the tax years from 2017 to 2020 will begin to expire, if not utilized, by 2039. Utilization of the net operating loss carryforwards may be subject to an annual limitation according to Section 382 of the Internal Revenue Code of 1986 as amended, and similar provisions.

The difference between the statutory income taxes on the Company’s pre-tax loss and the Company’s effective income tax rate during the years ended December 31, 2022 and 2021 is primarily due to a recorded valuation allowance. The valuation allowance for deferred tax assets as of December 31, 2022 and 2021 was $1,520,345 and $16,702,680, respectively. The net change in the total valuation allowance for the years ended December 31, 2022, and 2021 was a decrease of $15,182,335 and $5,328,621, respectively.

In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future table income during the periods in which those temporary differences become deductible. Management considers the scheduled reversals of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.

The Company recognizes interest accrued to unrecognized tax benefits and penalties as income tax expense. The Company accrued total penalties and interest of $0 during the years ended December 31, 2022 and 2021 and in total, as of both December 31, 2022 and 2021 has recognized penalties and interest of $0.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which they operate. In the normal course of business, the Company is subject to examination by federal and foreign jurisdictions where applicable based on the statute of limitations that apply in each jurisdiction. As of December 31, 2022, open years related to all jurisdictions are 2021, 2020, and 2019. The Company has no open tax audits with any taxing authority as of December 31, 2022.