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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Taxes [Abstract]  
INCOME TAXES

Note 13. INCOME TAXES

 

The provision for income taxes for the years ended December 31, 2024 and 2023, is set forth below:

 

   Year Ended   Year Ended 
   December 31,   December 31, 
  2024   2023 
Current        
Federal  $
-
   $
-
 
State   
    -
    
     -
 
           
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, 2024 and 2023 is set forth below:

 

   Year Ended   Year Ended 
   December 31,   December 31, 
   2024   2023 
U.S. statutory income tax rate   21.00%   21.00%
State taxes, net of federal benefit   0.22%   2.43%
Permanent difference, overaccruals, and non-deductible items   -0.82%   -2.71%
Change in state rate   -7.53%   -15.20%
Deferred tax valuation allowance   -13.77%   -10.13%
True-up and Other   0.90%   4.61%
Total   0.00%   0.00%


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

 

   December 31,   December 31, 
   2024   2023 
Deferred tax assets:        
Current:        
Net operation loss  $4,871,000   $4,996,000 
Allowance for doubtful accounts   140,000    133,000 
Inventory - IRC 263A adjustment   296,000    336,000 
Stock based compensation - options and restricted stock   218,000    159,000 
Capitalized engineering costs   134,000    211,000 
Amortization - NTW Transaction   178,000    251,000 
Inventory reserve   644,000    715,000 
Deferred gain on sale of real estate   14,000    23,000 
Accrued Expenses   113,000    37,000 
Disallowed interest   2,269,000    2,024,000 
Operating lease liabilities   339,000    546,000 
Total deferred tax asset before valuation allowance   9,216,000    9,431,000 
Valuation allowance   (8,091,000)   (7,903,000)
Total deferred tax asset after valuation allowance   1,125,000    1,528,000 
           
Deferred tax liabilities   (255,000)   (1,114,000)
Property and equipment   (870,000)   (414,000)
Total deferred tax liabilities   (1,125,000)   (1,528,000)
           
Net deferred tax asset  $
-
   $
-
 

 

During the years ended December 31, 2024 and 2023, 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, 2024 and 2023, the Company provided a valuation allowance on its net deferred tax assets of $8,091,000 and $7,903,000, respectively. The Company’s valuation allowance increased by $188,000 and $202,000 for the years ended December 31, 2024 and 2023, respectively.

 

As of December 31, 2024, the Company had a Federal net operating loss carry forward of approximately $21,788,000, of which approximately $14,144,000 expires from 2033 through 2037 and $7,644,000 does not expire. In addition, the Company has net operating loss carryforwards from various states of approximately $4,669,000 which expire starting in 2035.

 

The utilization of the Company’s net operating losses may be subject to a U.S. federal limitation due to the “change in ownership provisions” under Section 382 of the Internal Revenue Code and other similar limitations in various state jurisdictions. Such limitations may result in a reduction of the amount of net operating loss carryforwards in future years and possibly the expiration of certain net operating loss carryforwards before their utilization.

 

At December 31, 2024 and 2023, 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, 2024, and 2023, 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 2021 through 2024 tax years generally remain subject to examination by federal and state tax authorities.