NOTE 7 - INCOME TAXES

12 Months Ended

Dec. 31, 2014

NOTE 7 - INCOME TAXES

Significant components of the Company's deferred tax assets and liabilities are summarized as follows:

	December 31,			December 31,
	2014			2013
Deferred tax assets:
Net operating loss carry forwards	$	2,810,000		$	2,928,000
Long lived assets		262,000			270,000
Share based payments		-			71,000
Other		58,000			35,000
Deferred tax asset		3,130,000			3,304,000

Deferred tax liabilities:
Long lived assets		(89,000	)		(44,000	)
Deferred tax liabilities		(89,000	)		(44,000	)
Net deferred tax asset		3,041,000			3,260,000
Less: Valuation allowance		(3,003,000	)		(3,140,000	)
Net deferred tax asset	$	38,000		$	120,000

The recognized deferred tax asset is based upon the expected utilization of its benefit from future taxable income. The Company has federal net operating loss (“NOL”) carryforwards of approximately $7,470,000 as of December 31, 2014, which is subject to limitations under Section 382 of the Internal Revenue Code. These carryforward losses are available to offset future taxable income, and begin to expire in the year 2025 to 2030. A valuation allowance has been recorded, for those deferred tax assets that management does not believe that the realization is more likely than not.

The foregoing amounts are management’s estimates and the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually obtaining and fulfilling new profitable sales agreements and modifying products. The inability to obtain new profitable contracts could reduce estimates of future profitability, which could affect the Company’s ability to realize the deferred tax assets.

A reconciliation of the statutory income tax rate to the effective rate is as follows for the period December 31, 2014 and 2013:

	December 31,			December 31,
	2014			2013
Federal income tax rate		34	%		34	%
State income tax, net of federal benefit		5	%		6	%
Permanent differences		13	%		6	%
Prior year adjustments		5	%		(35	%)
Change in valuation allowance		(4	%)		(70	%)
Effective income tax rate		53	%		(59	%)

Income tax provision (benefit):

	Year Ended
	December 31,		December 31,
	2014		2013
Current:
Federal	$	76,000	$	-
State and local		26,000		-

Total current tax provision		102,000		-

Deferred:
Federal		116,000		-
State and local		-		-
Release of valuation allowance		-		(120,000	)

Total deferred tax provision (benefit)		116,000		(120,000	)

Total provision (benefit)	$	218,000		(120,000	)

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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