9.INCOME TAXES
The provision for income taxes consists of the following:
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For the Years Ended December 31, |
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2016 |
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2015 |
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2014 |
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Current tax provision |
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Federal |
|
$ |
— |
|
$ |
— |
|
$ |
— |
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|
State |
|
1,132 |
|
7,877 |
|
8,177 |
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Total current provision |
|
1,132 |
|
7,877 |
|
8,177 |
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Deferred tax provision |
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Federal |
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— |
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— |
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— |
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State |
|
— |
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— |
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— |
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Total deferred tax provision |
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— |
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— |
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— |
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Total income tax provision |
|
$ |
1,132 |
|
$ |
7,877 |
|
$ |
8,177 |
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|
|
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The Company has $20.2 million in tax benefits attributable to net operating losses for federal tax purposes. The loss carry forwards will begin to expire in 2028 for federal tax purposes and began to expire for state tax purposes in 2013. The Company also has credits for alternative minimum taxes (“AMT”) paid of $202 thousand that are available to offset future federal income taxes, excluding AMT. Such credits do not expire.
Deferred taxes are provided for those items reported in different periods for income tax and financial reporting purposes. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below:
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December 31, |
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2016 |
|
2015 |
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Deferred tax assets |
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Net operating loss carry forwards |
|
$ |
7,651,971 |
|
$ |
5,979,717 |
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Credit for alternative minimum tax paid |
|
201,773 |
|
201,773 |
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|
Accrued expenses and reserves |
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1,348,032 |
|
1,383,461 |
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Employee stock option expense |
|
117,613 |
|
303,465 |
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Nonemployee stock option expense |
|
12,770 |
|
12,770 |
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Inventory |
|
361,437 |
|
356,170 |
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Impairment |
|
172,983 |
|
— |
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|
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Deferred tax assets |
|
9,866,579 |
|
8,237,356 |
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Deferred tax liabilities |
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Property and equipment |
|
(669,246 |
) |
(485,384 |
) |
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Deferred tax liabilities |
|
(669,246 |
) |
(485,384 |
) |
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Net deferred assets |
|
9,197,333 |
|
7,751,972 |
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Valuation allowance |
|
(9,197,333 |
) |
(7,751,972 |
) |
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Net deferred tax assets |
|
$ |
— |
|
$ |
— |
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The valuation allowance increased $1,445,361 for 2016. The valuation allowance decreased $1,633,485 for 2015.
A reconciliation of income taxes based on the federal statutory rate and the effective income tax rate is summarized as follows:
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December 31, |
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|
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|
2016 |
|
2015 |
|
2014 |
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|
Income tax at the federal statutory rate |
|
35.0 |
% |
35.0 |
% |
35.0 |
% |
|
State tax, net of federal tax |
|
2.9 |
|
2.9 |
|
2.9 |
|
|
Change in valuation allowance |
|
(39.1 |
) |
(37.8 |
) |
(34.3 |
) |
|
Permanent differences |
|
4.7 |
|
0.7 |
|
(0.7 |
) |
|
Other |
|
(3.5 |
) |
(0.6 |
) |
(3.2 |
) |
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|
|
|
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Effective tax rate |
|
0.0 |
% |
0.2 |
% |
(0.3 |
)% |
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The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions. The Company’s federal income tax returns for all tax years ended on or after December 31, 2013, remain subject to examination by the Internal Revenue Service. The Company’s state and local income tax returns are subject to examination by the respective state and local authorities over various statutes of limitations, most ranging from three to five years from the date of filing.