8. INCOME TAXES

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

Income tax expense consists of:

	Current		Deferred		Total
Year Ended December 31, 2018:
U.S. federal	$	––	$	––	$	––
State and local		14,305		––		14,305
Foreign		11,493		––		11,493
	$	25,798	$	––	$	25,798
Year Ended December 31, 2019:
U.S. federal	$	––	$	––	$	––
State and local		10,792		––		10,792
Foreign		14,073		––		14,073
	$	24,865	$	––	$	24,865

A reconciliation of the expected income tax expense or benefit to actual follows:

	2018			2019
Computed "expected" US tax (benefit) at Federal statutory rate	$	(12,594	)	$	(685,652	)
Change resulting from:
State and local income taxes, net of federal income tax benefit		4,927			(102,770	)
Valuation allowance		115,960			411,810
Non––deductible items		701			87,998
Expired Federal net operating loss		90,375			218,376
Federal and state rate changes		(173,571	)		95,103
State net operating loss true up and rate change		––			––
Income tax expense	$	25,798		$	24,865

Temporary differences at December 31 follow:

	2018			2019
Deferred income tax assets:
Inventories	$	129,349		$	145,884
Accounts receivable		137,522			253,559
Accrued expenses		72,749			80,068
Net operating loss and tax credit carry forwards		13,020,122			13,276,081
Plant and equipment		13,615			6,014
Stock compensation		112,664			123,841
Lease accounting		––			26,515
Other – interest expense		––			12,385
Total deferred income tax assets		13,486,022			13,924,347
Valuation allowance		(13,486,022	)		(13,924,347	)
Net deferred tax assets	$	––		$	––

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”) that significantly revised the U.S. tax code effective January 1, 2018 by, among other things, lowering the corporate income tax rate from a top marginal rate of 35% to a flat 21%. Other than the reduction in statutory rate, the Company does not anticipate the regulations will have a material impact on income taxes in future years.

As of December 31, 2019 the Company had federal net operating loss carry forwards of approximately $56,267,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2020 to 2038. Federal net operating losses occurring after December 31, 2017, of approximated $3,138,000 may be carried forward indefinitely. As of December 31, 2019, the Company had state net operating loss carry forwards of approximately $11,350,000 which are available to offset future taxable income. They are due to expire in varying amounts from 2031 through 2038. A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more-likely than-not that the benefits from such assets will not be realized.

The Company reviews annually the guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statements. Tax positions must meet a "more-likely-than-not" recognition threshold. At December 31, 2019 and 2018, the Company did not have any uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2019 and 2018.

The Company files income tax returns in the United States and Mexico. Tax years subsequent to 2015 remain subject to examination for both US federal and state tax reporting purposes. Tax years subsequent to 2013 remain subject to examination for Mexico tax reporting purposes. The foreign income tax reported represents tax on operations for the Company that is located in a special economic zone in Mexico. Other than the Mexico facility, the Company has no operations in a foreign location.