Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.19.1
Income Taxes
12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  
Income Taxes
Note 13 — 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,
 
 
 
2018
 
 
2017
 
 
2016
 
 
 
 
 
 
 
 
 
 
 
Pre-Tax Income (Loss)
 
 
 
 
 
 
 
 
 
 
 
 
U.S.
 
$
(22,082,137
)
 
$
(19,680,720
)
 
$
(19,263,625
)
Outside the U.S.
 
 
206,424
 
 
 
47,218
 
 
 
43,543
 
Total Pre-Tax Income (Loss)
 
$
(21,875,713
)
 
$
(19,633,502
)
 
$
(19,250,082
)
 
The provision expense/(benefit) for income taxes for the years ended December 31, 2018, 2017 and 2016 was as follows:
 
 
 
2018
 
 
2017
 
 
2016
 
 
 
 
 
 
 
 
 
 
 
U.S. Income Taxes:
 
 
 
 
 
 
 
 
 
 
 
 
Current Provision
 
$
 
 
$
 
 
$
 
Deferred Provision
 
 
(4,848,470
)
 
 
3,639,752
 
 
 
(5,963,589
)
Valuation Allowance
 
 
4,848,470
 
 
 
(3,639,752
)
 
 
5,963,589
 
Income Taxes Outside the U.S.:
 
 
 
 
 
 
 
 
 
 
 
 
Current Provision
 
 
 
 
 
 
 
 
 
Deferred Provision
 
 
41,285
 
 
 
215,745
 
 
 
(197,907
)
Valuation Allowance
 
 
(41,285
)
 
 
(215,745
)
 
 
197,907
 
State Income Taxes:
 
 
 
 
 
 
 
 
 
 
 
 
Current Provision
 
 
 
 
 
 
 
 
 
Deferred Provision
 
 
(140,933
)
 
 
(59,530
)
 
 
(75,442
)
Valuation Allowance
 
 
140,933
 
 
 
59,530
 
 
 
75,442
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Provision
 
$
 
 
$
 
 
$
 
 
A reconciliation of the statutory U.S. federal income tax rate to the effective rates for the years ended December 31, 2018, 2017 and 2016 is as follows:
 
 
 
2018

%
 
 
2017

%
 
 
2016

%
 
Federal Income Tax at Statutory Rate
 
 
21.0
 
 
 
34.0
 
 
 
34.0
 
State Tax Provision, Net of Federal Benefit
 
 
0.3
 
 
 
0.3
 
 
 
0.3
 
Foreign Tax Rate Differential
 
 
 
 
 
 
 
 
(0.7
)
Change in Corporate Tax Rates from 34% to 21%
 
 
 
 
 
(52.9
)
 
 
 
Permanent Differences
 
 
(1.5
)
 
 
(2.4
)
 
 
(2.4
)
Federal Tax Credits
 
 
2.5
 
 
 
1.1
 
 
 
2.9
 
Other
 
 
0.3
 
 
 
0.6
 
 
 
0.0
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Effective Tax Rate
 
 
22.6
 
 
 
(19.3
)
 
 
34.1
 
Change in Valuation Allowance
 
 
(22.6
)
 
 
19.3
 
 
 
(34.1
)
 
 
 
 
 
 
 
 
 
 
 
 
 
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,
 
 
 
2018
 
 
2017
 
 
2016
 
 
 
 
 
 
 
 
 
 
 
Deferred Tax Assets:
 
 
 
 
 
 
 
 
 
 
 
 
Net Operating Loss Carry-forwards
 
$
20,920,285
 
 
$
16,167,791
 
 
$
19,752,311
 
Tax Credit Carry-forwards
 
 
3,035,384
 
 
 
2,404,490
 
 
 
2,398,817
 
Inventory Valuation Adjustment
 
 
104,450
 
 
 
675,830
 
 
 
622,168
 
Officer’s Compensation
 
 
 
 
 
86,670
 
 
 
271,095
 
Stock-based Compensation
 
 
175,753
 
 
 
 
 
 
 
Loss from Foreign Operations
 
 
 
 
 
 
 
 
197,907
 
Other
 
 
207,327
 
 
 
108,734
 
 
 
44,372
 
Total Deferred Tax Assets
 
 
24,443,199
 
 
 
19,443,515
 
 
 
23,286,670
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deferred Tax Liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
Income from Foreign Operations
 
 
59,123
 
 
 
17,838
 
 
 
 
Other
 
 
22,069
 
 
 
11,789
 
 
 
76,815
 
Total Deferred Tax Liabilities
 
 
81,192
 
 
 
29,627
 
 
 
76,815
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Deferred Tax Assets Before Valuation Allowance
 
$
24,362,007
 
 
$
19,413,888
 
 
$
23,209,855
 
Valuation Allowance
 
 
(24,362,007
)
 
 
(19,413,888
)
 
 
(23,209,855
)
 
 
 
 
 
 
 
 
 
 
 
 
 
Net Deferred Tax Assets
 
$
 
 
$
 
 
$
 
 
As of December 31, 2018, the Company has approximately 
$99 
million in federal net operating loss carry-forwards and approximately 
$3 
million of federal and state credit carry-forwards. The federal and state NOL carry-forwards generated in tax years prior to 2018 will begin to expire in 2020. As a result of the Tax Act, the 2018 federal NOL carry-forward has no expiration. The federal and state credit carry-forwards began to expire during 2018. 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 the result of the assessment of the FASB ASC 740-10, Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109), the Company has no unrecognized tax benefits. The Company’s U.S. Federal and state tax matters for the years 2014 through 2017 remain subject to examination by the respective tax authorities.
 
FASB ASC 740 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.