Note

– Income Taxes

December 31, 2019,

the Company had approximately

$588,000

of federal research and development tax credits. If

not

utilized, the research and development tax credits expire from

2034

2039.

For the year ended

December 31, 2019,

the Company has provided a full valuation allowance against all of the net deferred tax assets in the amount of

$2,497,414.

This was based on management’s assessment, including the last

two

years of operating losses, that it is more likely than

not

that the net deferred tax assets

may

not

be realized in the future.

The expense/(benefit) for income taxes includes the following:

	201 9			201 8
Current:
Federal	$	-		$	58,304
State		(11,506	)		80,367
Total current tax provision		(11,506	)		138,671
Deferred:
Federal		1,425,414			(495,233	)
State		---			---
Total deferred tax provision		1,425,414			(495,233	)
Income tax expense / (benefit)	$	1,413,908		$	(356,562	)

The tax effects of temporary differences giving rise to significant portions of the net deferred taxes are as follows:

				Revised
	201 9			201 8
Deferred income tax assets:
Allowance for doubtful accounts	$	5,293		$	5,060
Inventory capitalization		7,107			6,197
Depreciation and amortization		-			-
Research & development tax credits		588,096			413,680
Compensation costs		202,287			356,983
Vacation accrual		142,230			167,644
Interest expense carryforward		144,340			66,149
Net operating loss carryforward		1,798,315			832,565
Other items		52,232			16,446
Total deferred tax asset		2,939,900			1,864,724
Deferred incomes tax liability:
Property and equipment - tax over book depreciation		(442,486	)		(439,310	)
Less valuation allowance		(2,497,414	)		---
Net long-term deferred tax asset	$	-		$	1,425,414

During the Company’s review of its deferred tax assets for the year ended

December 31, 2019,

it was determined that there was an error in the amounts recorded during the years ended

December 31, 2018

and prior related to the deferred tax asset for stock-based compensations costs. The effects of this error were determined to be immaterial to any of the years effected. As such, the Company elected to record in this financial statement an adjustment to the prior periods as a revision. As a result of this revision, as of

December 31, 2018

the deferred tax asset was reduced by

$679,000

and retained earnings was reduced by

$679,000.

For the year ended

December 31, 2018

there was

impact to the income tax benefit.

The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:

	201 9			201 8
Expected provision at federal statutory tax rate (21%)	$	(1,031,888	)	$	(1,167,092	)
Provision for valuation allowance		2,497,414			-
Foreign tax loss		57,856			99,215
Adjustment to 2017 tax return		-			58,304
State taxes, net of federal benefit		(11,506	)		80,367
Stock-based compensation expense		-			185,675
Federal research & development credit		(174,416	)		(83,245	)
Other permanent differences		76,448			470,214
Income tax expense/(benefit)	$	1,413,908		$	(356,562	)

The Company’s foreign subsidiary, CVD Tantaline ApS incurred a loss of approximately

$276,000,

which would provide a

$61,000

deferred tax asset as of

December 31, 2019,

based on the standard corporate tax rate of

22%

in Denmark. For the year ended

December 31, 2018

the Company had a loss of

$463,000

which would provide a

$102,000

deferred tax asset of

$102,000.

However, sufficient uncertainty exists as to the realizability of these assets such that a full valuation allowance has been necessary.