Income Taxes

12 Months Ended

Dec. 31, 2019

. INCOME TAXES

For the years ended December 31, 2019 and 2018, the Company has net losses and no current tax expense was recorded. The Company has recorded a full valuation allowance on its deferred tax assets for the years ended December 31, 2019 and 2018 and no deferred tax expense was recorded.

The components of the provision for income tax is as follows:


	Years Ended December 31,
	2019		2018
Current
Federal	$	—	$	—
State and Local	—		—
Total Current	—		—

Deferred
Federal	—		—
State and Local	—		—
Total Deferred	—		—

Total provision for income taxes	$	—	$	—

The reconciliation of the statutory federal income tax with the provision for income taxes is as follows:


	Years Ended December 31,
	2019		2018
Federal tax benefit at statutory rates	21.0	%	21.0	%
State and local taxes	(0.6)	%	0.8	%
Mark-to-market adjustment on stock warrants	(9.3)	%	1.5	%
Other permanent differences and credits	(0.8)	%	0.0	%
Change in valuation allowance	(10.3)	%	(23.3)	%

Total tax benefit	0.0	%	0.0	%

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. A valuation allowance is provided against deferred tax assets when, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. The Company cannot be certain that future taxable income will be sufficient to realize its deferred tax assets, and accordingly a full valuation allowance has been provided on its deferred tax assets. The valuation allowance increased by approximately $3.8 million and $8.5 million during the years ended December 31, 2019 and 2018, respectively.

Components of the Company’s deferred tax assets and liabilities are as follows:


	December 31
	2019		2018
Deferred Tax Assets:
Accrued expenses and reserves	$	802,526	$	850,857
Warranty reserve	1,275,047		1,539,765
Non-qualified stock options	961,919		1,034,261
Property, plant and equipment	202,755		183,917
Disallowed interest expense	—		1,118,212
Other temporary differences	(88,200)		—
Net operating losses	30,213,192		24,818,785
Total Deferred Tax Assets	33,367,239		29,545,797
Valuation Allowance	(33,367,239)		(29,545,797)
Total Deferred Tax Assets, net of valuation allowance	$	—	$	—

At December 31, 2019, the Company has approximately $90.6 million, of federal net operating loss (“NOL”) carry-forwards which expire through 2037 and approximately $49.7 million of federal NOLs that carry-forward indefinitely. Additionally, at December 31, 2019, the Company has approximately $0.8 million of state and local NOLs carry-forwards which expire through 2038. The NOL carry-forwards may be limited in certain circumstances, including ownership changes.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Certain tax attributes are subject to an annual limitation as a result of certain cumulative changes in ownership interest of significant shareholders which could constitute a change of ownership as defined under Internal Revenue Code Section 382. The Company has not yet analyzed whether it has experienced an ownership change for this purpose to determine if any of the net operating losses to date have a limitation on future deductibility.

Tabular reconciliation of unrecognized tax benefits


	2019		2018
Unrecognized tax benefits - January 1	$	1,163,282	$	1,163,282
Gross increases - tax positions in prior period	—		—
Gross decreases - tax positions in prior period	—		—
Gross increases - tax positions in current period	—		—
Settlement	—		—
Lapse of statute of limitations	—		—
Unrecognized tax benefits - December 31	$	1,163,282	$	1,163,282

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2019, and 2018, due to the Company’s continued losses, no amounts of interest and penalties have been recognized in the Company’s consolidated statements of operations. If the unrecognized tax benefits were reversed, a deferred tax asset and corresponding valuation allowance would be recorded, and thus the reversal would have no impact on the effective rate.

The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and local jurisdictions. Generally, the Company’s 2016 through 2018 tax years remain open and subject to examination by federal, state and local taxing authorities. However, federal, state, and local net operating losses from 2009 through 2018 are subject to review by taxing authorities in the year utilized.