Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.7.0.1
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Taxes [Abstract]  
INCOME TAXES
5. INCOME TAXES

 

The Company is subject to federal and state income taxes.

 

The Company and subsidiaries file a consolidated federal income tax return. The Company’s consolidated provision for income taxes for the years ended December 31, 2016 and 2015 consists of the following:

 

      Year Ended     Year Ended  
      December 31, 2016     December 31, 2015  
  Income Tax Expense (benefit)            
  Current federal tax expense            
  Federal   $ -0-     $ -0-  
  State     -0-       -0-  
  Deferred tax (benefit)                
  Federal   $ -0-     $ -0-  
  State     -0-       -0-  
  Total   $ -0-     $ -0-  

 

The consolidated provision for income taxes for the years ended December 31, 2016 and 2015 differs from that computed by applying federal statutory rates to income before federal income tax expense, as indicated in the following analysis:

 

      Year Ended     Year  
      December 31, 
2016
    December 31, 
2015
 
               
  Expected federal tax provision (benefit) at 35% rate   $ (150,935 )   $ (185,065 )
  Surtax exemption     21,562       26,438  
  Meals and entertainment     6,416       2,724  
  Valuation allowance     (19,967 )     171,493  
  State income tax     142,924       (15,590 )
  Total income tax   $ -0-     $ -0-  
                   
  Effective tax rate     0.0 %     0.0 %

 

A summary of deferred tax assets and liabilities as of December 31, 2016 and 2015 is as follows:

 

      Year Ended     Year Ended  
      December 31, 2016     December 31, 2015  
  Deferred tax assets:                
  Reserve for inventory obsolescence   $ 15,930     $ 18,008  
  Reserve for bad debt     16,563       2,251  
  Stock option compensation     172,797       108,963  
  Federal tax loss carryforward     258,219       135,562  
  State tax loss carryforward     39,852       20,923  
  Less valuation allowance     (398,676 )     (235,543 )
                   
  Total Deferred Tax Asset     104,685       50,164  

      Year Ended     Year Ended  
      December 31, 
2016
    December 31, 
2015
 
  Deferred tax liabilities:            
  Accumulated depreciation and amortization     (104,685 )     (50,164 )
  Total deferred tax liabilities     (104,685 )     (50,164 )
                   
  NET DEFERRED TAX   $ -0-     $ -0-  

 

As of December 31, 2016, the Company had $860,730 federal and state net operating loss carryforwards, which results in a Federal and State deferred tax asset of $298,071, expiring in 2034, 2035 and 2036.

 

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence such as our projections for future growth.

 

On the basis of this evaluation, as of December 31, 2016, a valuation allowance of $398,676 has been recorded to record only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as our projections for growth.