Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
For the years ended December 31, 2022, 2021 and 2020, with the exception of the impact from non-deductible inventory and prepaid purchases reserves, the Company has taxable losses primarily due to operations and stock compensation related deductions and thus has no current federal tax expense recorded. The taxable income generated by non-deductible inventory in the current year is fully offset by available net operating losses. As of December 31, 2021, the Company has increased the valuation allowance recorded against its deferred tax assets due to the sale of LMC shares during the year and the uncertainty about our ability to utilize our remaining deferred tax assets in future years. The Company continued to record a valuation allowance against all of its deferred tax assets as of December 31, 2022.
The components of the (benefit) provision for income taxes are as follows:

Years Ended December 31,
2022 2021 2020
 Federal $ —  $ —  $ — 
 State and Local —  (13,159) — 
Total Current —  (13,159) — 
 Federal —  (21,864,569) 21,864,569 
 State and Local —  30,639  (30,639)
Total Deferred —  (21,833,930) 21,833,930 
Total (benefit) provision for income taxes $ —  $ (21,847,089) $ 21,833,930 

The reconciliation of taxes at the federal statutory rate to our provision for income taxes was as follows:

Years Ended December 31,
2022 2021
Federal tax benefit at statutory rates 21.0  % 21.0  % 21.0  %
State and local tax at statutory rates —  % 0.1  % (0.1) %
Fair value adjustments on warrant liability —  % —  % 37.1  %
Fair value adjustments on convertible notes (0.3) % (0.4) % 2.8  %
Tax gain on sale of investment —  % (0.6) % —  %
Stock-based compensation deductions (1.7) % 0.2  % (6.6) %
Research and development credits 0.3  % 1.2  % —  %
Other permanent differences and credits (0.5) % (0.2) % —  %
Change in valuation allowance (18.8) % (16.1) % (30.4) %
Total tax benefit —  % 5.2  % 23.8  %

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. When realization of the deferred tax asset is more likely than not to occur, the benefit related to the deductible temporary differences attributable to operations is recognized as a reduction of income tax expense. As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2022 and 2021, our ability to realize our net deferred tax asset is not more likely than not to occur and the valuation allowance reduces the deferred tax asset to zero.
Significant components of the Company’s deferred tax assets and liabilities are as follows:
December 31
2022 2021
Deferred Tax (Liabilities) Assets:
Accrued expenses and reserves $ 4,528,418  $ 590,340 
Warranty reserve 470,342  976,956 
Inventory and prepaid purchase reserves 17,326,397  21,506,626 
Non-qualified stock options (328,410) (160,921)
Property, plant and equipment (1,955,842) 54,556 
Research and experimental costs 4,435,891  — 
Lease right-of-use assets (2,515,792) — 
Lease liability 2,175,883  — 
Issuance fees on convertible notes 343,886  687,772 
Federal tax credits 5,099,750  4,873,099 
Net operating losses 66,112,929  45,143,740 
Total Deferred Tax (Liabilities) Assets 95,693,452  73,672,168 
Valuation Allowance (95,693,452) (73,672,168)
Total Deferred Tax Assets (Liabilities), net of valuation allowance $ —  $ — 

As of December 31, 2022 and 2021, the Company has approximately $81.8 million and $81.8 million of federal net operating loss (“NOL”) carry-forwards which expire through 2037. Additionally, at December 31, 2022 and 2021, the Company had approximately $228.4 million and $128.9 million of federal NOLs that carry-forward indefinitely, and approximately $1.0 million and $0.9 million of state and local NOL carry-forwards, which expire through 2037. The NOL carry-forwards may be limited in certain circumstances, including changes in ownership.

Under the provisions of the Internal Revenue Code, the net operating loss and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Certain tax attributes are subject to an annual limitation as a result of certain cumulative changes in ownership interest of significant shareholders which could constitute a change of ownership as defined under Internal Revenue Code Section 382. The Company completed a full analysis of historical ownership changes and determined that a portion of the NOLs to-date have a limitation on future deductibility. Approximately $8.4 million of NOLs incurred prior to 2014 will be unable to offset future taxable income and have been reserved via a valuation allowance to reduce the deferred tax asset to the expected realizable amount.

The following table presents a reconciliation of unrecognized tax benefits:

2022 2021
Unrecognized tax benefits - January 1 $ 805,392  $ 1,163,282 
Gross increases - tax positions in prior period —  — 
Gross decreases - tax positions in prior period —  (357,890)
Gross increases - tax positions in current period —  — 
Settlement —  — 
Lapse of statute of limitations —  — 
Unrecognized tax benefits - December 31 $ 805,392  $ 805,392 

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2022, and 2021, due to the Company’s continued losses, no amounts of interest and penalties have been recognized in the Company’s Consolidated Statements of Operations. If the unrecognized tax benefits were reversed, a deferred tax asset and corresponding valuation allowance would be recorded, and thus the reversal would have no impact on the effective rate.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and local jurisdictions. Generally, the Company’s 2019 through 2021 tax years remain open and subject to examination by federal, state and local
taxing authorities. However, federal, state, and local net operating losses from 2009 through 2021 are subject to review by taxing authorities in the year utilized.