Income Taxes

9 Months Ended

Sep. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 10 – INCOME TAXES

The components of income tax provision (benefit) for the three and nine months ended September 30, 2016 and 2015 are as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Current
Federal	$	(29,183	)	$	(9,231	)	$	-		$	7,462
State		(8,517	)		(2,633	)		-			2,128
Total Current		(37,700	)		(11,864	)		-			9,590
Deferred
Federal		(7,243	)		3,677			28,933			101,999
State		(1,278	)		629			5,106			17,491
Valuation Allowance		8,521			(4,306	)		(34,039	)		(119,490	)
Total provision (benefit)	$	(37,700	)	$	(11,864	)	$	-		$	9,590

The Company’s effective income tax rate differs from the amount computed by applying the federal statutory income tax rate to income before income taxes as follows:

	Three Months Ended						Nine Months Ended
	September 30, 2016			September 30, 2015			September 30, 2016			September 30, 2015
Income tax provision at federal statutory rate		(34.0	)%		(34.0	)%	$	(34.0	)%		(34.0	)%
State income tax provision, net of federal benefit		(6.0	)%		(6.0	)%		(6.0	)%		(6.0	)%
Change in valuation allowance		57.9	%		69.3	%		40.0	%		36.5	%
Income taxes at effective income tax rate		17.9	%		29.3	%		-	%		(3.5	)%

The components of deferred taxes consist of the following at September 30, 2016 and December 31, 2015:

	September 30, 2016			December 31, 2015
Inventory reserves	$	131,358		$	140,141
Allowance for doubtful accounts and returns		107,331			93,581
Impairment of note receivable		100,000			100,000
Other accrued expenses		86,857			87,505
Depreciation		(64,702	)		(52,702	)
Stock compensation		40,487			6,087
Less: Valuation allowance		(401,331	)		(374,612	)
Net deferred tax assets	$	-		$	-

Deferred income taxes result from temporary differences between income tax and financial reporting computed at the effective income tax rate. The Company has established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. Management periodically evaluates the recoverability of the deferred tax assets. At such time it is determined that it is more likely than not that deferred tax assets are realizable, the valuation allowance will be reduced.

The Company files U.S. federal and U.S. state tax returns. The Company’s major tax jurisdictions are U.S. federal and the States of California and New Jersey. Such amount has been accrued and reflected in income taxes payable. Years that are subject to tax examinations are the open years from 2013 through 2015.