Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of income (loss) before taxes for the years ended December 31, 2023 and 2022 are as follows:

	2023		2022
United States	$	6,949,525	$	(32,493,098)
International	759,984		(5,531,211)
Total	$	7,709,509	$	(38,024,309)

The components of income tax expense for the years ended December 31, 2023 and 2022 are as follows:

	2023		2022
Current tax expense
Federal	$	421,237	$	—
Foreign	—		—
State	190,250		69,447
Deferred tax expense
Federal	—		—
Foreign	—		—
State	—		—
Income tax expense	$	611,487	$	69,447

The components of the net deferred tax assets and liabilities as of December 31, 2023 and 2022 are as follows:

	2023		2022
Deferred tax assets:
Net operating loss carryforwards	$	21,713,610	$	25,459,247
Allowance for credit losses	3,141,395		3,389,435
Equity based compensation	802,100		1,322,642
Research and experimental expenditures	412,699		216,391
Lease liability	285,415		17,575
Startup costs	8,339		9,514
Accruals	922,553		458,609
Nondeductible interest	5,691,795		3,816,974
Other	60,819		365,743
Total net deferred tax assets	33,038,725		35,056,130
Valuation allowance	(32,450,807)		(34,868,210)
Deferred tax liabilities:
Depreciation and amortization	(291,252)		(168,505)
Right-of-use asset	(296,666)		(19,415)
Total net deferred tax liabilities	(587,918)		(187,920)
Net deferred tax asset (liability)	$	—	$	—

A reconciliation of our provision for income taxes at the federal statutory rate to the reported income tax provision for the years ended December 31, 2023 and 2022 are as follows:

	2023		2022
Computed "expected" tax benefit	21.0	%	(21.0)	%
State income tax benefit, net of federal tax effect	5.8		(2.6)
Nondeductible equity based compensation	10.2		9.7
Other permanent differences	1.7		(0.5)
Change in valuation allowance	(30.9)		15.9
Foreign rate differentials and other	0.1		(1.3)
Income tax expense	7.9	%	0.2	%

As of December 31, 2023, we had federal, state, and foreign net operating loss carryforwards of approximately $70,548,000, $41,328,000, and $18,357,000, respectively. The federal net operating loss carryforwards that originated after 2017 have an indefinite life and may be used to offset 80% of a future year’s taxable income. The federal net operating loss carryforwards that originated prior to 2018 have expiration dates between 2036 and 2037. The state net operating losses will carryforward for between 5 years and indefinitely and begin to expire in 2027.

Our ability to utilize a portion of our net operating loss carryforwards to offset future taxable income is subject to certain limitations under Section 382 of the Internal Revenue Code due to changes in our equity ownership. We do not believe an ownership change under Section 382 has occurred.

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the 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.

On the basis of this evaluation, as of December 31, 2023, a valuation allowance of $32,450,807 has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth. The change in valuation allowance was ($2,417,403) and $6,026,185 for the years ended December 31, 2023 and 2022, respectively.

We file income tax returns in the U.S. federal jurisdiction, Brazil, Canada, Germany, India, Lithuania, the Netherlands, and various U.S. states. We do not believe a material uncertain tax position exists as of December 31, 2023. Based on our assessment of many factors, including past experience and complex judgements about future events, we do not currently anticipate significant changes in our uncertain tax positions over the next 12 months. In connection with the adoption of the referenced provisions, we recognize interest and penalties accrued related to unrecognized tax benefits in income tax expense. As of December 31, 2023, we had no accrued interest and penalties. Our federal and state tax returns are open for review going back to the 2020 tax year.

Management’s intention is to reinvest foreign earnings into our foreign operations. To date, our various foreign subsidiaries do not have any earnings.