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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

Note 14. INCOME TAXES

 

The provision for income taxes for the years ended December 31, 2022 and 2021, is set forth below:

 

Current and Deferred   

Year Ended
December 31,
2022

    

Year Ended
December 31,
2021

 
           
Federal  $
-
   $
-
 
States   
-
    
-
 
           
Total Provision for Income Taxes  $
-
   $
-
 

 

The following is a reconciliation of our income tax rate computed using the federal statutory rate to our actual income tax rate for the years ended December 31, 2022 and 2021 is set forth below:

 

   Year Ended
December 31,
2022		   Year Ended
December 31,
2021
As Revised		 
U.S. statutory income tax rate   21.0%   21.0%
State taxes, net of federal benefit   4.1%   4.1%
Permanent difference, overaccruals, and non-deductible items   (6.9)%   6.3%
Change in state rate   0.7%   8.3%
Deferred tax valuation allowance   (18.4)%   (38.7)%
Other   (.5)%   (1.0)%
Total   0.00%   0.00%

 

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

 

       December 31, 
   December 31,
2022		   2021
As Revised		 
Deferred tax assets:        
Current:        
Net operating loss  $5,075,000   $4,959,000 
Allowance for doubtful accounts   71,000    149,000 
Inventory - IRC 263A adjustment   411,000    377,000 
Stock based compensation - options and restricted stock   183,000    183,000 
Capitalized engineering costs   331,000    430,000 
Amortization - NTW Transaction   359,000    445,000 
Inventory reserve   932,000    790,000 
Deferred gain on sale of real estate   36,000    45,000 
Accrued expenses   30,000    18,000 
Disallowed interest   1,663,000    1,576,000 
Operating lease liabilities   814,000    984,000 
Total deferred tax asset before valuation allowance   9,905,000    9,956,000 
Valuation allowance   (7,701,000)   (7,503,000)
Total deferred tax asset after valuation allowance   2,204,000    2,453,000 
           
Deferred tax liabilities:          
Property and equipment   (1,583,000)   (1,697,000)
Operating Lease ROU assets   (621,000)   (756,000)
Total deferred tax liabilities   (2,204,000)   (2,453,000)
           
Net deferred tax asset  $
-
   $
-
 

 

During the year ended December 31, 2022, the Company determined that certain attributes of Deferred Tax Assets and Liabilities were incorrect for December 31, 2021 and 2020. See Note 16 for further information.

 

During the years ended December 31, 2022 and 2021, 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, 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, 2022 and 2021, the Company provided a valuation allowance on its net deferred tax assets of $7,701,000 and $7,503,000, respectively.

 

As of December 31, 2022, the Company had a Federal net operating loss carry forward of approximately $22,420,000, of which approximately $12,220,000 expires from 2023 through 2037 and $10,200,000 does not expire. In addition, the Company has net operating loss carry forwards from various states of approximately $22,600,000 which expire from 2035 through 2042.

 

At December 31, 2022 and 2021, 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, 2022, and 2021, 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 2019 through 2022 tax years generally remain subject to examination by federal and state tax authorities.

 

In August 2022, the Inflation Reduction Act of 2022, (the “IRA”), was signed into law which includes a stock buyback excise tax of 1% on share repurchases, which will apply to net stock buybacks after December 31, 2022. We do not expect this to have a material impact if and when share repurchases occur.