INCOME TAXES

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

The provision (benefit) for income taxes from continued operations for the period ended September 30, 2016 and the year ended December 31, 2015 consist of the following:

	September 30, 2016			December 31, 2015
Current:
Federal AMT	$	32,110		$	—
State		132,000			—
		164,110			—
Deferred:
Federal	$	(659,000	)	$	5,074
State		(13,000	)		5,510
		(672,000	)		10,584
Change in valuation allowance		672,000			(10,584	)
Provision (benefit) for income taxes, net	$	164,110		$	—

Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The components of deferred tax assets consist principally from the following:

	September 30, 2016			December 31, 2015
Inventory	$	20,000		$	41,401
Allowance for Doubtful Accounts		66,000			162,849
Foreign tax credits		30,000			30,086
Share Based Compensation		39,000			39,485
Other		—			24,100
Property and equipment		45,000			16,712
Net operating loss carryforwards		7,134,000			7,666,946
Valuation allowance		(6,645,000	)		(7,168,700	)
Deferred income tax asset		689,000			812,879
Deferred expenses		—			(71,482	)
Other		—			(52,397	)
Deferred income tax liability		—			(123,879	)
Net deferred tax asset	$	689,000		$	689,000

The Company has net operating loss carryforwards of approximately $21,000,000 for federal purposes available to offset future taxable income through 2035 and 2.298,000 for State of Colorado purposes which expire in various years through 2035, The Company has provided a valuation reserve against the full amount of the net operating loss benefit, because in the opinion of management the benefits from net operating losses carried forward may be impaired or limited on certain circumstances. Events which may cause limitations in the amount of net operating losses that the Company may utilize in any one year include, but are not limited to, limitations imposed under  Section 382 of the Internal Revenue Code, as amended, from change of more than 50% over a three-year period. The impact of any limitations that may be imposed for future issuances of equity securities, including issuances with respect to acquisitions have not been determined.

ASC 740 requires the consideration of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets. In evaluating the ability to recover deferred tax assets, the Company considered available positive and negative evidence, giving greater weight to its recent cumulative losses and its ability to carry-back losses against prior taxable income and lesser weight to its projected financial results due to the challenges of forecasting future periods. The Company also considered, commensurate with its objective verifiability, the forecast of future taxable income including the reversal of temporary differences. At that time the Company continued to have sufficient positive evidence, including recent cumulative profits, a reduction in operating expenses, the ability to carry-back losses against prior taxable income and an expectation of improving operating results, showing a valuation allowance was not required. At the end of the year ended of quarter ended September 30, 2016 and year ended December 31, 2015, expectations of taxable income necessitated a reduction in the valuation allowance and a restoration of $689,000 of deferred tax assets related to net operating losses expected to be utilized in the next 12 months.  At September 30, 2016, the Company continues to maintain the deferred tax asset of $689,000.