Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.8.0.1
Income Taxes
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Note 10 — Income Taxes
 
The Company files U.S. federal and various state and foreign tax returns.
 
Pre-tax earnings consisted of the following for the years ended:
 
 
 
December 31,
 
December 31,
 
December 31,
 
 
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
Pre-Tax (Loss)
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
(19,680,720)
 
$
(19,263,625)
 
$
(13,425,887)
 
Outside the U.S.
 
 
47,218
 
 
43,543
 
 
(1,591)
 
Total Pre-Tax (Loss)
 
$
(19,633,502)
 
$
(19,250,082)
 
$
(13,427,478)
 
 
The provision expense/(benefit) for income taxes for the years ended December 31, 2017, 2016 and 2015 was as follows:
 
 
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
U.S. Income Taxes:
 
 
 
 
 
 
 
 
 
 
Current Provision
 
$
 
$
 
$
 
Deferred Provision
 
 
3,639,752
 
 
(5,963,589)
 
 
(3,730,342)
 
Valuation Allowance
 
 
(3,639,752)
 
 
5,963,589
 
 
3,730,342
 
Income Taxes Outside the U.S.:
 
 
 
 
 
 
 
 
 
 
Current Provision
 
 
 
 
 
 
 
Deferred Provision
 
 
215,745
 
 
(197,907)
 
 
 
Valuation Allowance
 
 
(215,745)
 
 
197,907
 
 
 
State Income Taxes:
 
 
 
 
 
 
 
 
 
 
Current Provision
 
 
 
 
 
 
 
Deferred Provision
 
 
(59,530)
 
 
(75,442)
 
 
(128,572)
 
Valuation Allowance
 
 
59,530
 
 
75,442
 
 
128,572
 
 
 
 
 
 
 
 
 
 
 
 
Total Provision
 
$
 
$
 
$
 
 
 
A reconciliation of the statutory U.S. federal income tax rate to the effective rates for the years ended December 31, 2017, 2016 and 2015 is as follows:
 
 
 
2017
%
 
2016
%
 
2015
%
 
Federal Income Tax at Statutory Rate
 
 
34.0
 
 
34.0
 
 
34.0
 
State Tax Provision, Net of Federal Benefit
 
 
0.3
 
 
0.3
 
 
0.3
 
Foreign Income Taxed at Other Than 34%
 
 
 
 
(0.7)
 
 
 
Change in Corporate Tax Rates from 34% to 21%
 
 
(52.9)
 
 
 
 
 
Loss on Derivative Valuation
 
 
 
 
 
 
(6.3)
 
Other
 
 
(0.7)
 
 
0.5
 
 
0.7
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
(19.3)
 
 
34.1
 
 
28.7
 
Change in Valuation Allowance
 
 
19.3
 
 
(34.1)
 
 
(28.7)
 
 
 
 
 
 
 
 
 
 
 
 
Net Effective Tax Rate
 
 
 
 
 
 
 
 
Significant components of the Company’s deferred tax assets and liabilities at year end are as follows:
 
 
 
December 31,
 
December 31,
 
December 31,
 
 
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
 
 
 
 
 
Deferred Tax Assets:
 
 
 
 
 
 
 
 
 
 
Net Operating Loss Carry-forwards
 
$
16,167,791
 
$
19,752,311
 
$
15,027,603
 
Tax Credit Carry-forwards
 
 
2,404,490
 
 
2,398,817
 
 
1,823,661
 
Inventory Valuation Adjustment
 
 
675,830
 
 
622,168
 
 
161,944
 
Officer’s Compensation
 
 
86,670
 
 
271,095
 
 
141,491
 
Loss from Foreign Operations
 
 
 
 
197,907
 
 
 
Other
 
 
108,734
 
 
44,372
 
 
89,783
 
Total Deferred Tax Assets
 
 
19,443,515
 
 
23,286,670
 
 
17,244,482
 
 
 
 
 
 
 
 
 
 
 
 
Deferred Tax Liabilities:
 
 
 
 
 
 
 
 
 
 
Income from Foreign Operations
 
 
17,838
 
 
 
 
 
 
 
Other
 
 
11,789
 
 
 
 
 
 
 
Total Deferred Tax Liabilities
 
 
29,627
 
 
76,815
 
 
271,565
 
 
 
 
 
 
 
 
 
 
 
 
Net Deferred Tax Assets Before Valuation Allowance
 
$
19,413,888
 
$
23,209,855
 
$
16,972,917
 
Valuation Allowance
 
 
(19,413,888)
 
 
(23,209,855)
 
 
(16,972,917)
 
 
 
 
 
 
 
 
 
 
 
 
Net Deferred Tax Assets
 
$
 
$
 
$
 
 
As of December 31, 2017, the Company has approximately $76 million in net operating loss carry-forwards and approximately $2.4 million of federal and state credit carry-forwards which will begin to expire in 2018 if not utilized. Utilization of the NOL carry-forwards may be subject to an annual limitation in the case of sufficient equity ownership changes under Section 382 of the tax law or the NOL’s may expire unutilized.
 
As a result of the assessment of the FASB ASC 740-10 (Prior Authoritative Literature: FASB Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109), the Company has no unrecognized tax benefits. By statute, tax years 2013-2017 are open to examination by the major taxing jurisdictions to which the Company is subject.
 
FASB ASC 740 “Accounting for Income Taxes”, requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on differing treatment of items for financial reporting and income tax reporting purposes. The deferred tax balances are adjusted to reflect tax rates by tax jurisdiction, based on currently enacted tax laws, which will be in effect in the years in which the temporary differences are expected to reverse. In light of the historic losses of the Company, a 100% valuation allowance has been recorded to fully offset any benefit associated with the net deferred tax assets, for which realization is not considered more likely than not to occur.
 
The Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017 significantly lowered the corporate income tax rate to a flat 21% effective January 1, 2018. There was no impact on the income tax provision for the lowering of the corporate tax rate because the change in the net deferred tax asset resulting from the lower rate was fully offset by the corresponding change in the Company’s valuation allowance.