Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.1
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Taxes  
Income Taxes

Note 11 — 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, 

 

    

2019

    

2018

    

2017

Pre-Tax Income (Loss)

 

 

  

 

 

  

 

 

  

U.S.

 

$

(26,482,033)

 

$

(22,082,137)

 

$

(19,680,720)

Outside the U.S.

 

 

5,663

 

 

206,424

 

 

47,218

Total Pre-Tax Income (Loss)

 

$

(26,476,370)

 

$

(21,875,713)

 

$

(19,633,502)

 

The provision expense/(benefit) for income taxes for the years ended December 31, 2019, 2018 and 2017 was as follows:

 

 

 

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

U.S. Income Taxes:

 

 

  

 

 

  

 

 

  

Current Provision

 

$

 —

 

$

 —

 

$

 —

Deferred Provision

 

 

(5,382,746)

 

 

(4,848,470)

 

 

3,639,752

Valuation Allowance

 

 

5,382,746

 

 

4,848,470

 

 

(3,639,752)

Income Taxes Outside the U.S.:

 

 

 

 

 

  

 

 

  

Current Provision

 

 

 —

 

 

 —

 

 

 —

Deferred Provision

 

 

(511,672)

 

 

41,285

 

 

215,745

Valuation Allowance

 

 

511,672

 

 

(41,285)

 

 

(215,745)

State Income Taxes:

 

 

  

 

 

  

 

 

  

Current Provision

 

 

 —

 

 

 —

 

 

 —

Deferred Provision

 

 

(189,200)

 

 

(140,933)

 

 

(59,530)

Valuation Allowance

 

 

189,200

 

 

140,933

 

 

59,530

Total Provision

 

$

 —

 

$

 —

 

$

 —

 

A reconciliation of the statutory U.S. federal income tax rate to the effective rates for the years ended December 31, 2019, 2018 and 2017 is as follows:

 

 

 

 

 

 

 

 

    

2019

    

2018

    

2017

 

 

%  

 

%  

 

%

Federal Income Tax at Statutory Rate

 

21.0

 

21.0

 

34.0

State Tax Provision, Net of Federal Benefit

 

0.3

 

0.3

 

0.3

Change in Corporate Tax Rates from 34% to 21%

 

 —

 

 —

 

(52.9)

Permanent Differences

 

(0.1)

 

(1.5)

 

(2.4)

Federal Tax Credits

 

1.3

 

2.5

 

1.1

Stock Compensation

 

(1.9)

 

 —

 

 —

Foreign Tax Provision

 

1.9

 

 —

 

 —

Other

 

0.5

 

0.3

 

0.6

Effective Tax Rate

 

23.0

 

22.6

 

(19.3)

Change in Valuation Allowance

 

(23.0)

 

(22.6)

 

19.3

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, 

 

    

2019

    

2018

    

2017

Deferred Tax Assets:

 

 

  

 

 

  

 

 

  

Net Operating Loss Carry-forwards

 

$

25,678,591

 

$

20,920,285

 

$

16,167,791

Tax Credit Carry-forwards

 

 

3,535,863

 

 

3,035,384

 

 

2,404,490

Inventory Valuation Adjustment

 

 

982,160

 

 

104,450

 

 

675,830

Officer’s Compensation

 

 

 —

 

 

 —

 

 

86,670

Stock-based Compensation

 

 

 —

 

 

175,753

 

 

 —

Lease Obligation Liability

 

 

446,488

 

 

 —

 

 

 —

Other

 

 

263,348

 

 

207,327

 

 

108,734

Total Deferred Tax Assets

 

 

30,906,450

 

 

24,443,199

 

 

19,443,515

Deferred Tax Liabilities:

 

 

  

 

 

  

 

 

  

Income from Foreign Operations

 

 

 —

 

 

59,123

 

 

17,838

Lease Right of Use Asset

 

 

446,488

 

 

 —

 

 

 —

Other

 

 

14,335

 

 

22,069

 

 

11,789

Total Deferred Tax Liabilities

 

 

460,823

 

 

81,192

 

 

29,627

Net Deferred Tax Assets Before Valuation Allowance

 

$

30,445,627

 

$

24,362,007

 

$

19,413,888

Valuation Allowance

 

 

(30,445,627)

 

 

(24,362,007)

 

 

(19,413,888)

Net Deferred Tax Assets

 

$

 —

 

$

 —

 

$

 —

 

As of December 31, 2019, the Company has approximately $118 million in US federal net operating loss (NOL) carry-forwards, $129,000 in United Kingdom NOL carry-forwards, and $1.35 million of Japanese NOL 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 Cuts and Jobs Act of 2017, the federal NOL carry-forwards created in 2018 and 2019 have no expiration. The Company has state NOLs of approximately $3.4 million available in several jurisdictions in which it files that will begin to expire in 2034. The Company also has approximately $3.5 million of federal and state credit carry-forwards.  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 2015 through 2018 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.