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Revision of Previously Issued Consolidated Financial Statement

12 Months Ended

Dec. 31, 2022

Disclosure of Revision of Previously Issued Financial Statement [Abstract]

Revision of Previously Issued Consolidated Financial Statement

Note 16. Revision of Previously Issued Consolidated Financial Statement

Due to errors discovered in the Company’s 2020 tax return, the Company revised certain previously issued disclosures related to the components of its deferred tax assets and liabilities and valuation allowance as of December 31, 2021 and 2020. Additionally, the Company has revised the reconciliation of its income tax rate computed using the federal statutory rate for the year ended December 31, 2021. The errors related primarily to the misapplication of the carryback of net operating losses under the CARES Act provision and mathematical errors related to the Company’s inventory reserve. Since the Company provided a full valuation allowance on its net deferred tax assets, there was no impact to the Consolidated Balance Sheet as of December 31, 2021 and the Consolidated Statements of Operations, Cash Flows and Stockholders’ Equity for the year ended December 31, 2021. As a result of the errors, the Company will be amending its 2020 and 2021 income tax returns.

The Company had previously disclosed that its net operating loss carry forward as of December 31, 2021 was $29,100,000. The proper amount that should have been disclosed was $21,971,000. Along with this finding, the Company further reviewed its disclosure of the rate reconciliation and deferred tax calculation along with the valuation allowance of its net deferred tax assets. Other items that were corrected in the disclosure included disallowed interest, stock based compensation and operating lease liability along with the associated operating lease ROU assets.

The below table summarizes the revisions to the reconciliation of our income tax rate computed using the federal statutory rate to our actual income tax rate for the year ended December 31, 2021:

	Year Ended December 31,						Year Ended December 31,
	2021 As Reported			Adjustment			2021 As Revised
U.S. statutory income tax rate		21.0	%		0.0	%		21.0	%
State taxes, net of federal benefit		5.1	%		(1.0	)%		4.1	%
Permanent difference, overaccruals, and non-deductible items		(40.4	)%		46.7	%		6.3	%
Change in state rate		0.0	%		8.3	%		8.3	%
Deferred tax valuation allowance		14.3	%		(53.0	)%		(38.7	)%
Other		0.0	%		(1.0	)%		(1.0	)%
Total		0.0	%		0.0	%		0.0	%

The table below summarizes the revisions to the attributes of the Deferred Tax Assets as of December 31, 2021:

	December 31,						December 31,
	2021 As Reported			Adjustment			2021 As Revised
Deferred tax assets:
Net operating loss	$	6,737,000		$	(1,778,000	)	$	4,959,000
Allowance for doubtful accounts		155,000			(6,000	)		149,000
Inventory - IRC 263A adjustment		394,000			(17,000	)		377,000
Stock based compensation - options and restricted stock		393,000			(210,000	)		183,000
Capitalized engineering costs		449,000			(19,000	)		430,000
Amortization - NTW Transaction		442,000			3,000			445,000
Inventory reserve		824,000			(34,000	)		790,000
Deferred gain on sale of real estate		47,000			(2,000	)		45,000
Accrued expenses		204,000			(186,000	)		18,000
Disallowed interest		1,286,000			290,000			1,576,000
Operating lease liability		235,000			749,000			984,000
Capital loss carryforward		88,000			(88,000	)		-
Total non-current deferred tax asset before valuation allowance		11,254,000			(1,298,000	)		9,956,000
Valuation allowance		(9,628,000	)		2,125,000			(7,503,000	)
Total non-current deferred tax asset after valuation allowance		1,626,000			827,000			2,453,000

Deferred tax liabilities:
Property and equipment		(1,626,000	)		(71,000	)		(1,697,000	)
Operating lease ROU assets		-			(756,000	)		(756,000	)
Total deferred tax liabilities		(1,626,000	)		(827,000	)		(2,453,000	)

Net deferred tax asset	$	-		$	-		$	-

The table below summarizes the revisions to the attributes of the Deferred Tax Assets as of December 31, 2020:

	December 31,						December 31,
	2020 As Reported			Adjustment			2020 As Revised
Deferred tax assets:
Net operating loss	$	6,594,000		$	(1,422,000	)	$	5,172,000
Allowance for doubtful accounts		252,000			(3,000	)		249,000
Inventory - IRC 263A adjustment		341,000			(3,000	)		338,000
Stock based compensation - options and restricted stock		277,000			(73,000	)		204,000
Capitalized engineering costs		336,000			228,000			564,000
Deferred Rent		4,000			-			4,000
Amortization - NTW Transaction		495,000			(73,000	)		422,000
Inventory reserve		1,250,000			(579,000	)		671,000
Deferred gain on sale of real estate		132,000			(1,000	)		131,000
Accrued expenses		158,000			(158,000	)		-
Disallowed interest		1,813,000			(18,000	)		1,795,000
Operating lease liability		292,000			905,000			1,197,000
Total non-current deferred tax asset before valuation allowance		11,944,000			(1,197,000	)		10,747,000
Valuation allowance		(9,394,000	)		1,262,000			(8,132,000	)
Total non-current deferred tax asset after valuation allowance		2,550,000			65,000			2,615,000

Deferred tax liabilities:
Property and equipment		(2,150,000	)		443,000			(1,707,000	)
Operating lease ROU assets		-			(908,000	)		(908,000	)
Other		(400,000	)		400,000			-
Total deferred tax liabilities		(2,550,000	)		(65,000	)		(2,615,000	)

Net deferred tax asset	$	-		$	-		$	-