XML 25 R11.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Taxes [Abstract]  
Income Taxes

4. Income Taxes

  

The Organization for Economic Co-operation and Development (OECD) Pillar Two Model Rules are intended to apply for tax years beginning in 2024. The Pillar Two Model Rules establishes a global minimum tax of 15% for multinational companies with consolidated revenue above €750 million. Many foreign jurisdictions have adopted the Pillar Two Model Rules and other foreign jurisdictions are in the process of enacting legislation to adopt it. The Company does not expect to be impacted by the Pillar Two Model Rules as it will not meet the consolidated revenue threshold in the near term.

 

The components of loss before income tax benefit are as follows:

 

   December 31, 
   2023   2022 
Domestic Operations  $(498,673)  $(2,683,143)
Foreign Operations   (588,914)   (900,772)
   $(1,087,587)  $(3,583,915)

 

The Company’s benefit for income taxes is comprised of the following: 

 

   December 31, 
   2023   2022 
Current        
Federal  $
-
   $
-
 
State and local   6,579    15,685 
Foreign   76,031    
-
 
Total Current   82,610    15,685 
Deferred          
Federal   
-
    
-
 
State and local   
-
    
-
 
Foreign   (102,862)   (187,350)
Change in Valuation Allowance   
-
    
-
 
Total Deferred   (102,862)   (187,350)
Total Benefit  $(20,252)  $(171,665)

 

The Company’s effective tax rate differs from the U.S. federal statutory income tax rate of 213% for 2023 and 2022 as follows:

 

   2023   2022 
Income tax benefit at federal statutory rate   21.0%   21.0%
Permanent Differences   
-
%   
-
%
State and local taxes   (1.8)%   (0.7)%
Valuation allowance   (10.5)%   (7.6)%
Deferred tax adjustment   (1.9)%   
-
%
Share based compensation   (6.4)%   (7.8)%
Foreign Income Tax Rate Differential   1.1%   0.5%
Other   0.5%   (0.6)%
Effective tax rate   2.0%   4.8%

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:  

 

   December 31, 
   2023   2022 
Deferred Tax Assets:        
U.S. federal and state net operating losses  $2,939,449   $3,436,822 
Foreign net operating losses   -    103,375 
Share-based compensation   480,773    511,603 
Amortization of intangible assets   429,651    583,727 
Rent   17,291    36,413 
Capitalized IRC §174 costs   1,972,960    1,134,472 
Tax credits   62,969    62,969 
Other   285,245    257,473 
Subtotal   6,188,338    6,126,854 
Less Valuation Allowance:   (6,099,163)   (5,984,591)
Total Deferred Tax Assets   89,175    142,263 
Deferred Tax Liabilities:          
Amortization of intangible assets   (615,452)   (820,279)
Property and equipment   (12,850)   (31,262)
Other   (74,914)   (7,625)
Total Deferred Tax Liabilities   (703,216)   (859,166)
Net Deferred Tax Liability  $(614,041)  $(716,903)

  

In assessing the Company’s ability to recover its deferred tax assets, the Company evaluated whether it is more likely than not that some portion or the entire deferred tax asset will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in those periods in which temporary differences become deductible and/or net operating losses can be utilized. The Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. A significant piece of objective negative evidence evaluated was cumulative loss incurred over the three-year period ended December 31, 2023. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. Based on the weight of available evidence, the Company determined that its U.S. deferred tax assets are not realizable on a more-likely-than-not basis and has recorded a valuation allowance against its net U.S. deferred tax assets. The Company’s valuation allowance increased by $114,572 during 2023. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred income tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly.

 

As of December 31, 2023, the Company has U.S. federal net operating loss carryforwards of approximately $12.8 million, of which $10.4 million continue to be subject to a severe annual limitation under Section 382. Approximately $1.3 million of the $2.4 million not subject to limitation under Section 382 may be used to offset 100% of future taxable income but expire in 2036-2037, if not utilized. The remaining $1.1 million not subject to limitation under Section 382 may be used to offset 80% of future taxable income and can be carried forward indefinitely.

 

The Company applies the applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2023, the Company has no uncertain tax positions. As such, there are no uncertain tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months from December 31, 2023.

 

The open tax years for the federal income tax return are 2020 through 2023. The state income tax returns have varying statutes of limitations. The open tax years relating to any of the Company’s federal and state net operating losses begin in 2020.