XML 28 R17.htm IDEA: XBRL DOCUMENT v3.5.0.2
NOTE 10 - INCOME TAXES
 6 Months Ended
Jun. 30, 2016
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
NOTE 10 – INCOME TAXES

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 $7,358,000, of which approximately $5,869,000 is reserved, as of June 30, 2016, 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 2026 to 2030. 

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.

Income tax provision (benefit):

 
  
Six Months Ended
  
 
  
June 30,
    
June 30,
  
 
  
2016
    
2015
  
Current:
            
               Federal
  
$
294,185
    
$
206,926
  
               State and local
    
36,472
      
24,852
  
 
                
               Total current tax provision
    
330,657
      
231,778
  
 
                
Deferred:
                
               Federal
    
17,100
      
16,946
  
               State and local
    
1,900
      
2,054
  
               Release of valuation allowance
    
(370,000
)
    
(200,000
)
 
                
               Total deferred tax provision (benefit)
    
(351,000
)
    
(181,000
)
 
                
Total (benefit) provision
  
$
(20,343
)
    
50,778
  

For the year six months ended June 30, 2016, the Company’s Federal and State provision requirements were calculated based on the estimated tax rate. The Federal effective rate is higher than the statutory rate primarily due to Incentive Stock Options (ISO) expense which is generally never tax deductible for the Company. The benefit for the six months ended June 30, 2016 was $20,343. The effective tax rate consists primarily of the 40% federal statutory tax rate and a blended 5% state and local tax rate.

For the six months ended June 30, 2016, the Company's Federal and State provision requirements were offset by the reversal of the remaining valuation allowance taking into consideration Section 382 limitations, to offset current and future taxable income totaling $1,008,000, no longer deemed necessary, and recorded a net tax benefit of $370,000, which represents a reduction in its valuation allowance on tax attributes that are expected to be utilized based on management's assessment and evaluation of historical and projected income. For the six months ended June 30, 2015, the Company's Federal and State provision requirements were offset by the reversal of a portion of the valuation allowance totaling $560,000, no longer deemed necessary, and recorded a net tax benefit of $200,000.