INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

(9) INCOME TAXES

Income tax expense consists of:

	Current		Deferred		Total
Year Ended December 31, 2022:
U.S. Federal	$	-	$	-	$	-
State and local		59,846		-		59,846
Foreign		52,502		-		52,502
	$	112,348	$	-	$	112,348
Year Ended December 31, 2023:
U.S. Federal	$	-	$	-	$	-
State and local		16,623		-		16,623
Foreign		25,996		-		25,996
	$	42,619	$	-	$	42,619

The principal components of deferred tax assets, net, were as follows at December 31:

	2023			2022
Deferred income tax assets:
Capitalized research and development	$	-		$	1,234,710
Inventories		550,023			889,821
Accounts receivable		261,564			357,920
Accrued expenses		29,414			266,665
Net operating loss and tax credit carry forwards		19,244,464			14,742,578
Plant and equipment		85,332			39,311
Stock compensation		-			120,661
Other – interest expense		293,932			187,990
Total deferred income tax assets		20,464,729			17,839,656
Valuation allowance		(20,464,729	)		(17,839,656	)
Net deferred tax assets	$	-		$	-

As of December 31, 2023, the Company had Federal net operating loss carry forwards of approximately $76.9 million which are available to offset future taxable income. They are due to expire in varying amounts from 2024 to 2041. Federal net operating losses occurring after December 31, 2018, of approximately $38.5 million may be carried forward indefinitely. As of December 31, 2023, the Company had state net operating loss carry forwards of approximately $44.9 million which are available to offset future taxable income. They are due to expire in varying amounts from 2033 through 2040. A valuation allowance has been established for the full amount of net 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 total valuation allowance increased by $2.6 million from December 31, 2022 to December 31, 2023.

The Federal and state NOLs may be subject to certain limitations under Section 382 of the Internal Revenue Code, which could significantly restrict the Company’s ability to use the NOLs to offset taxable income in subsequent years.

As result of changes made by the Tax Cuts and Jobs Act of 2017, that became effective as of January 1, 2022, the company is now required to capitalize for tax purposes certain research and development expenses and amortize domestic expenses over a 5 year period and foreign expenses over a 15 year period, resulting in a deferred tax asset for the capitalized amounts as reflected in the above table.

The following is a reconciliation of the statutory Federal income tax rate to the actual effective income tax rate for continuing operations:

	2023			2022
Federal tax (benefit) rate		21	%		21	%
Increase (decrease) in taxes resulting from:
State income taxes		4			1
Change in valuation allowance		(21	)		(9	)
Expiration of NOLs		(5	)		(13	)
Expiration of stock options		(1	)		(14	)
Permanent differences		1			(1	)
Changes in Federal and state rates		1			1
Effective income tax rate		0	%		(1	)%

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, 2023 and 2022, the Company did not have any material uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2023 and 2022.

The Company files income tax returns in the U.S., India, and Mexico. Tax years subsequent to 2017 remain subject to examination for both U.S. Federal and state tax reporting purposes. Tax years subsequent to 2016 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 an India operation and has no other operations in a foreign location. The India operation had no tax obligations as of December 31, 2023.