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Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
INCOME TAXES

Note 15. INCOME TAXES

 

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

 

   2020   2019 
         
Current        
Federal tax refund  $(1,416,000)  $- 
State   4,000    37,000 
Total (Benefit from) Expense for Income Taxes   (1,412,000)   37,000 
Deferred Tax Benefit   -    - 
Valuation Allowance   -    - 
Net (Benefit from) Provision for Income Taxes  $(1,412,000)  $37,000 

 

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,

 

   2020   2019 
         
U.S. statutory income tax rate   21.00%   21.00%
State taxes   -0.90%   -1.11%
Permanent difference, overaccruals, and non-deductible items   159.65%   -3.33%
Rate change and provision to return true-up   197.34%   0.62%
Expired stock options   0.00%   1.54%
Deferred tax valuation allowance   -393.63%   -20.13%
Cares Act Refund   458.76%   0.00%
Total   442.22%   -1.41%

 

The components of net deferred tax assets at December 31, 2020 and 2019 are set forth below:

 

   December 31,   December 31, 
   2020   2019 
Deferred tax assets:        
Current:        
Net operation loss  $6,594,000   $8,017,000 
Allowance for doubtful accounts   252,000    216,000 
Inventory - IRC 263A adjustment   341,000    268,000 
Stock based compensation - options and restricted stock   277,000    150,000 
Capitalized engineering costs   336,000    323,000 
Deferred rent   4,000    12,000 
Amortization - NTW Transaction   495,000    442,000 
Inventory reserve   1,250,000    1,000,000 
Deferred gain on sale of real estate   132,000    84,000 
Accrued Expenses   158,000    165,000 
Disallowed interest   1,813,000    1,431,000 
Right of Use Asset   292,000    329,000 
Total non-current deferred tax asset before valuation allowance   11,944,000    12,437,000 
Valuation allowance   (9,394,000)   (10,663,000)
Total non-current deferred tax asset after valuation allowance   2,550,000    1,774,000 
           
Deferred tax liabilities          
Property and equipment   (2,150,000)   (1,628,000)
Other   (400,000)   (146,000)
Total deferred tax liabilities   (2,550,000)   (1,774,000)
           
Net deferred tax asset  $-   $- 

 

During the years ended December 31, 2020 and 2019, 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, 2020 and 2019, the Company provided a valuation allowance on its net deferred tax assets of $9,394,000 and $10,663,000, respectively.

 

As of December 31, 2020, the Company had a Federal net operating loss carry forward of approximately $27,576,000, of which $22,461,000 expire in years through 2037 and $5,115,000 that do not expire. State net operating loss carry forwards total approximately $9,458,000 (with effective rates from 5.5% to 10%), expiring in years through 2040. 

 

At December 31, 2020 and 2019, 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, 2020 and 2019, 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 2017 through 2020 tax years generally remain subject to examination by federal and state tax authorities.

 

As a result of the passage of the CARES Act, the Company received $1,416,000 from the filing of a net operating loss carryback claim. The Company is currently evaluating the impact of other provisions of the CARES Act on its accounting for income taxes and does not believe it has a material impact at this time.