Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

Note 15. INCOME TAXES

The provision for (benefit from) income taxes as of December 31, is set forth below:

	2019		2018
Current
Federal tax refund	$	-	$	-
State		37,000		-
Prior Year overaccruals
Federal		-		-
State		-		-
Total Expense		37,000		-
Deferred Tax Benefit		-		(921,000	)
Valuation Allowance		-		921,000
Net Provision for Income Taxes	$	37,000	$	-

The following is a reconciliation of our income tax rate computed using the federal statutory rate to our actual income tax rate as of December 31,

	2019			2018
U.S. statutory income tax rate		21.00	%		21.00	%
State taxes		(1.11	)%		-	%
Permanent differences, overaccruals and non-deductible items		(3.33	)%		5.74	%
Rate change and provision to return true-up		0.62	%		(18.36	)%
Expired stock options		1.54	%		0.00	%
Deferred tax valuation allowance		(20.13	)%		(8.38	)%
Total		(1.41	)%		-	%

The components of net deferred tax assets at December 31, 2019 and 2018 are set forth below:

	December 31,			December 31,
	2019			2018
Deferred tax assets
Current:
Net operating losses	$	8,017,000		$	6,811,000
Allowance for doubtful accounts		216,000			124,000
Inventory – IRC 263A adjustment		268,000			248,000
Stock based compensation - options and restricted stock		150,000			161,000
Capitalized engineering costs		323,000			809,000
Deferred rent		12,000			248,000
Amortization - NTW Transaction		442,000			810,000
Inventory reserves		1,000,000			942,000
Deferred gain on sale of real estate		84,000			80,000
Accrued Expenses		165,000			49,000
Disallowed interest		1,431,000			918,000
Right of Use Asset		329,000			-
Other		-			314,000
Total non-current deferred tax assets before valuation allowance		12,437,000			11,514,000
Valuation allowance		(10,663,000	)		(10,135,000	)
Total non-current deferred tax assets after valuation allowance		1,774,000			1,379,000
Deferred tax liabilities:
Property and equipment		(1,628,000	)		(1,379,000	)
Other		(146,000	)		-
Total deferred tax liabilities		(1,774,000	)		(1,379,000	)
Net deferred tax asset	$	-		$	-

During the years ended December 31, 2019 and December 31, 2018, the Company recorded a valuation allowance equal to its net deferred tax assets. The Company determined that due to a recent history of net losses, that at this time, sufficient uncertainty exists regarding the future realization of these deferred tax assets through future taxable income. If, in the future, the Company believes that it is more likely than not that these deferred tax benefits will be realized, the valuation allowances will be reduced or eliminated. With a full valuation allowance, any change in the deferred tax asset or liability is fully offset by a corresponding change in the valuation allowance. At December 31, 2019 and 2018, the Company provided a valuation allowance on its net deferred tax assets of $10,663,000 and $10,135,000, respectively.

As of December 31, 2019, the Company had a Federal net operating loss carry forward of approximately $33,139,000, expiring in years beginning 2036 and State net operating loss carry forwards of approximately $9,600,000 (with effective rates from 5.5% to 10%), expiring in years through 2035. 

At December 31, 2019 and 2018, the Company had no material unrecognized tax benefits and no adjustments to liabilities or operations were required. The Company does not expect that its unrecognized tax benefits will materially increase within the next twelve months. The Company recognizes interest and penalties related to uncertain tax positions in interest expense. As of December 31, 2019 and 2018, the Company has not recorded any provisions for accrued interest and penalties related to uncertain tax positions.

In certain cases, the Company's uncertain tax positions are related to tax years that remain subject to examination by the relevant tax authorities. The Company files federal and state income tax returns in jurisdictions with varying statutes of limitations. The 2017 through 2019 tax years generally remain subject to examination by federal and state tax authorities.