CISO Global, Inc. Income Taxes Disclosure

NOTE 16 – INCOME TAXES

 

No current or deferred income tax benefit or expense was recognized in the years ended December 31, 2024 and 2023. 

 

A reconciliation of the statutory federal income tax benefit to actual tax benefit for the years ended December 31, 2024 and 2023 is as follows:

 

 SCHEDULE OF STATUTORY FEDERAL INCOME TAX BENEFIT TO ACTUAL TAX BENEFIT

		Year Ended December 31,
		2024				2023
Computed tax benefit at statutory rate			21.00	%			21.00	%
Stock-based compensation			(9.51	)%			(3.28	)%
Change in valuation allowance			(4.34	)%			(10.77	)%
Return to provision adjustments			(7.15	)%			(6.81	)%
Other, net			-	%			(0.14	)%
Effective tax rate			0.00	%			0.00	%

 

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows as of December 31, 2024 and 2023:

 SCHEDULE OF DEFERRED TAX ASSETS AND LIABILITIES

		2024				2023
		Year Ended December 31,
		2024				2023
Deferred tax assets:
Intangible assets		$	225,497			$	443,700
Allowance for doubtful accounts			32,230				53,700
Net operating loss carryforwards			10,791,845				8,707,500
Stock-based compensation			12,176,163				9,841,300
Accounts payable and accrued liabilities			432,604				239,800
Goodwill impairment			7,357,100				7,357,100
Other			375,496				100
Total deferred tax assets		$	31,390,935			$	26,643,200
Valuation allowance			(31,165,400	)			(26,452,500	)
Net deferred income taxes		$	225,535			$	190,700
Deferred tax liabilities
Property and equipment		$	(84,402	)		$	(74,400	)
Prepaid expenses			(141,133	)			(116,300	)
Total deferred tax liabilities			(225,535	)			(190,700	)
Net deferred tax liabilities		$	-			$	-

 

 

We account for deferred taxes under ASC 740, Income Taxes, which requires a reduction of the carrying amounts of deferred tax assets by a valuation allowance if, based on available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances for deferred tax assets is assessed periodically based on the ASC 740 more-likely-than-not realization threshold criterion. This assessment considers matters such as future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, legislative developments, and results of recent operations. The evaluation of the recoverability of the deferred tax assets requires that we weigh all positive and negative evidence to reach a conclusion that it is more likely than not that all or some portion of the deferred tax assets will not be realized. The weight given to the evidence is commensurate with the extent to which it can be objectively verified.

 

We have provided a valuation allowance for our net deferred tax assets at December 31, 2024 and 2023, due to the uncertainty surrounding the future realization of such assets and the cumulative losses we have generated. Therefore, no benefit has been recognized in the financial statements for the net operating loss carryforwards and other deferred tax assets. During the years ended December 31, 2024 and 2023, respectively, the valuation allowance increased by $4,712,900 and $22,344,508, respectively.

 

As of December 31, 2024, we had approximately $42,059,091 of consolidated federal net operating loss carryforwards and $39,977,845 of apportioned state net operating loss carryforwards available to offset future taxable income, respectively. If unused, the federal and state net operating loss carryforwards will begin to expire in 2032.

 

Utilization of net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended (“IRC”), and similar state provisions. We have not performed a detailed analysis to determine whether an ownership change under Section 382 of the IRC has occurred or will occur. We will perform an analysis as soon as is practicable to determine the extent of limitations. It is possible that additional limitations may arise in future years, even after an analysis is completed, due to future changes in the ownership of our Company.

 

We file federal and state income tax returns in jurisdictions with varying statutes of limitations. With few exceptions, we are no longer subject to federal or state income tax examinations by tax authorities for tax years prior to 2022 and 2021, respectively. We believe our income tax filing positions and deductions are more likely than not to be sustained on audit. Therefore, no liabilities for uncertain tax positions have been recorded.

 

As of the date of this filing, we have not filed our 2024 federal and state income tax returns. We expect to file these documents as soon as practicable.