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Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Note 15. INCOME TAXES

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

		2018				2017

Current
Federal tax refund		$	-			$	(178,000	)
State			3,000				8,000
Prior Year overaccruals
Federal			-				-
State			-				(27,000	)

Total (Benefit) Expense			3,000				(197,000	)
Deferred Tax Benefit			(921,000	)			(2,025,000	)
Valuation Allowance			921,000				(2,025,000	)
Net Provision for (Benefit from) Income Taxes		$	3,000			$	(197,000	)

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,

		2018				2017
U.S. statutory income tax rate			21.00	%			34.00	%
State taxes			-0.12	%			0.09	%
Permanent differences, overaccruals and non-deductible items			5.71	%			-0.22	%
Rate change and provision to return true-up			-18.36	%			-22.60	%
Expired stock options			0.00	%			-0.19	%
Deferred tax valuation allowance			-8.38	%			-10.09	%
Total			-0.15	%			0.99	%

The components of net deferred tax assets at December 31, 2018 and December 31, 2017 are set forth below:

		December 31,				December 31,
		2018				2017
Deferred tax assets
Current:
Net operating losses		$	6,811,000			$	7,730,000
Bad debts			124,000				135,000
Inventory - 263A adjustment			248,000				591,000
Accounts payable, accrued expenses and reserves			-				-
Total current deferred tax assets before valuation allowance			7,183,000				8,456,000
Valuation allowance			(7,183,000	)			(8,456,000	)
Total current deferred tax assets after valuation allowance			-				-

Non-current:
Stock based compensation - options and restricted stock			161,000				124,000
Capitalized engineering costs			809,000				281,000
Deferred rent			248,000				299,000
Amortization - NTW Transaction			810,000				519,000
Inventory reserves			942,000				960,000
Deferred gain on sale of real estate			80,000				80,000
Accrued Expenses			49,000				-
Disallowed interest			918,000				-
Other			314,000				114,000
Total non-current deferred tax assets before valuation allowance			4,331,000				2,377,000
Valuation allowance			(2,952,000	)			(758,000	)
Total non-current deferred tax assets after valuation allowance			1,379,000				1,619,000

Deferred tax liabilities:
Property and equipment			(1,379,000	)			(1,619,000	)
Amortization – NTW Goodwill			-				-
Amortization – Welding Transaction			-				-
Total non-current deferred tax liabilities			(1,379,000	)			(1,619,000	)

Net non-current deferred tax asset		$	-			$	-

During the years ended December 31, 2018 and December 31, 2017, 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, 2018 and 2017, the Company provided a valuation allowance on its deferred tax assets of $10,135,000 and $9,214,000, respectively.

At December 31, 2018 and 2017, 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, 2018 and 2017, 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 2014 through 2017 tax years generally remain subject to examination by federal and state tax authorities.