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15. INCOME TAXES
 12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES

There was no Federal income tax expense for the years ended December 31, 2016 and 2015 due to the Company’s net losses. Income tax expense represents minimum state taxes due.

 

The blended Federal and State tax rate of 39.83% applies to loss before taxes. The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes, (computed by applying the United States Federal tax rate of 34% to loss before taxes), as follows:

 

   Year ended December 31, 
   2016   2015 
Computed “expected” tax expense (benefit)  $(895,395)  $(625,441)
State taxes, net of federal benefit   (154,764)   (122,700)
Goodwill impairment and other non-deductible items   (31,134)   (106,020)
Change in deferred tax asset valuation allowance   1,081,293    854,161 
Income tax expense  $–   $– 

 

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. The effects of temporary differences that gave rise to significant portions of deferred tax assets and liabilities at December 31 are as follows:

 

   2016   2015 
Deferred tax assets:          
Charitable contributions  $4,128   $4,128 
Reserve for bad debt   25,548    25,345 
Stock options   4,776,104    4,599,689 
Inventory Adjustment   –    11,067 
Depreciation   33,638    – 
Other   25,159    19,634 
Net operating loss carryforward   9,167,042    8,297,039 
Total gross deferred tax assets   14,031,619    12,956,902 
Less: Deferred tax asset valuation allowance   (13,934,915)   (12,853,622)
Total net deferred tax assets   96,704    103,280 
           
Deferred tax liabilities:          
Accrued salaries   (96,704)   (96,704)
Depreciation   –    (6,576)
Total deferred tax liabilities   (96,704)   (103,280)
Total net deferred taxes  $–   $– 

 

The valuation allowance at December 31, 2016 was $13,934,915. The increase in the valuation allowance during 2016 was $1,081,293.

 

At December 31, 2016, the Company has a net operating loss carry forward of $23,012,877 available to offset future net income through 2036. The NOL expires during the years 2016 to 2036. The utilization of the net operating loss carryforwards is dependent upon the ability of the Company to generate sufficient taxable income during the carryforward period. In the event that a significant change in ownership of the Company occurs as a result of the Company’s issuance of common stock, the utilization of the NOL carry forward will be subject to limitation under certain provisions of the Internal Revenue Code. Management does not presently believe that such a change has occurred.