Quarterly report pursuant to Section 13 or 15(d)

NOTE 10 - INCOME TAXES

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NOTE 10 - INCOME TAXES
9 Months Ended
Sep. 30, 2015
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 $7,416,000 as of September 30, 2015, 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.

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.

   
Nine Months Ended
 
   
September 30,
   
September 30,
 
   
2015
   
2014
 
Current:
             
Federal
 
$
215,833
   
$
  268,528
 
State and local
   
  23,982
     
29,836
 
                 
Total current tax provision
   
  239,815
     
  298,364
 
                 
Deferred:
               
Federal
   
  25,650
     
  26,100
 
State and local
   
  2,850
     
  2,900
 
Release of valuation allowance
   
(200,000
)
   
  -
 
              
               
Total deferred tax provision (benefit)
   
(171,500
)
   
  29,000
 
                 
Total provision
 
$
68,315
   
$
  327,364
 

For the year nine months ended September 30, 2015, 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 provision for the nine months ended September 30, 2015 was $239,815. The effective tax rate consists primarily of the 34% federal statutory tax rate and a blended 3% state and local tax rate.

For the nine months ended September 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, 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.