NOTE 10 - INCOME TAXES
|9 Months Ended|
Sep. 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 $7,523,000 as of December 31, 2015, of which approximately $614,000 is reserved, as of September 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 2034.
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):
For the year nine months ended September 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 nine months ended September 30, 2016 was $2,282,380. The effective tax rate prior to the release of the valuation allowance consists primarily of the 40% federal statutory tax rate and a blended 5% state and local tax rate.
For the nine months ended September 30, 2016, the Company’s Federal and State provision requirements were offset by the reversal of a significant portion of its valuation allowance, no longer deemed necessary, taking into consideration Section 382 limitations, to offset current and future taxable income totaling $6,909,093 and recorded a net tax benefit of $2,563,637, 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 current and projected income. Additionally the return to provision true-up of prior year taxes owed was a result of overaccrual of taxes for the 2015 tax year. 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.
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.
Reference 1: http://www.xbrl.org/2003/role/presentationRef