| Income Taxes | Note 15. Income Taxes The provision for income taxes for the years ended and 2019 related to foreign taxes, state minimum tax and a benefit from the sale of state net operating losses. Domestic and foreign components of the loss before provision for income taxes is as follows:
December 31, 2020
December 31, 2019
Domestic
$
(23,706,566 )
$
(43,661,897
)
Foreign
(975,373 )
(1,468,287
)
Total
$
(24,681,940 )
$
(45,130,184
) The income tax provision from continuing operations contains the following components:
December 31, 2020
December 31, 2019
Federal
$
—
$
—
State
(1,170,890 )
7,712
Foreign
—
9,987
Total current
(1,170,890 )
17,699
Total deferred
—
—
Total income tax (benefit) expense
$
(1,170,890 )
$
17,699
The Company has evaluated the available evidence supporting the realization of its deferred tax assets, including the amount and timing of future taxable income, and has determined that it is more likely than not that its net deferred tax assets will not be realized in the United States and certain foreign jurisdictions. Due to uncertainties surrounding the realization of the deferred tax assets, the Company maintains a full valuation allowance against all of its net deferred tax assets. When the Company determines that it will be able to realize some portion or all of its deferred tax assets, an adjustment to its valuation allowance on its deferred tax assets would have the effect of increasing net income in the period such determination is made. The net change in the valuation allowance was an increase of $7.8 million. The significant components of the Company’s deferred income tax assets and liabilities after applying enacted corporate tax rates are as follows:
Year ended December 31,
2020
2019
Deferred tax assets
Net operating loss carryforwards
$
24,319,202
$
18,883,686
Accrued expenses
540,072
796,849
Intangibles
429,783
355,288
Inventory
202,580
78,206
Deferred rent
27,019
—
Charitable contributions
11,277
19,028
R&D credit
438,117
394,981
Lease liabilities
398,689
518,480
Stock compensation
3,069,124
750,449
Deferred tax assets
29,435,863
21,796,967
Less valuation allowance
(28,974,378 )
(21,171,967)
Total deferred tax assets
461,485
625,000
Fixed assets
(16,119 )
(15,222 )
Prepaid expenses
(300,125 )
(220,673 )
Right of use asset
(145,241 )
(389,105 )
Total deferred tax liabilities
(461,485 )
(625,000 )
Deferred tax assets, net
$
—
$
—
A reconciliation of the income tax provision computed at statutory rates to the reported income tax provision for the years ended and 2019 is as follows:
Year ended December 31,
2020
2019
Statutory rate
21.0%
21.0
State tax expected (recovery), net of federal benefit
4.2%
6.7
Stock compensation 6.8% —%
State tax NOL sale 3.7% —%
Nondeductible expenses
0.5%
(0.1)%
Loss incurred as pass-through
—%
—%
Other 0.1 —
Change in valuation allowance for deferred tax assets
(31.6)%
(27.6)%
Provision for income taxes
4.7%
—%
and 2019 87.2 65.7 U.S. federal losses can be carried forward indefinitely, and state losses expire in various amounts beginning in 2026. The Company also had accumulated losses totaling $3.9 million and $3.5 million in Germany which can be carried forward indefinitely. However, the NOL carryforwards may be, or become subject to, an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to an ownership change. Subsequent ownership changes may further affect the limitation in future years. If and when the Company utilizes the NOL carryforwards in a future period, it will perform an analysis to determine the effect, if any, of these loss limitation rules on the NOL carryforward balances . As of December 31, 2020, the Company had Federal and NJ research and development credits of $282,801 and $191,863 respectively. The Federal R&D credits can be carried forward 20 years and will begin to expire in 2038. The New Jersey R&D credits can be carried forward seven years Uncertain Tax Positions The Company has adopted certain provisions of ASC 740, “Income Taxes”, which prescribes a recognition threshold and measurement attribute for the recognition and measurement of tax positions taken or expected to be taken in income tax returns. The provisions also provide guidance on the de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, and accounting for interest and penalties associated with tax positions. The Company files income tax returns in the U.S. federal jurisdiction, and in various state and foreign jurisdictions. The Company’s tax returns are subject to tax examinations by U.S. federal and state tax authorities, or examinations by foreign tax authorities until the expiration of the respective statutes of limitation. The Company currently has no tax years under examination. As of , the Company does not have an accrual relating to uncertain tax positions. Interest and penalties, if any, as they relate to income taxes assessed, are included in the income tax provision. It is not anticipated that unrecognized tax benefits would significantly increase or decrease within 12 months of the reporting date. Coronavirus Aid, Relief, and Economic Security Act On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, the "CARES Act", was enacted and signed into law, and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act, among other things, includes changes to the tax provisions that benefits business entities and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, including, permitting net operating losses, or NOLs, carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. The CARES Act provides other reliefs and stimulus measures. The Company has evaluated the impact of the CARES Act, and does not expect that any provision of the CARES Act would result in a material cash benefit to the Company or have a material impact on its financial statements or internal controls over financial reporting. |
