4. Income Taxes

12 Months Ended

Dec. 31, 2015

Notes

4. Income Taxes

4.         Income Taxes

The benefit for federal income taxes consisted of:

	2015	2014
Current	$           -	$          (2,721)
Deferred	(88,470)	(49,401)
Benefit for federal income taxes	$        (88,470)	$        (52,122)

At December 31, 2015, the Company had approximately $56,000 of income tax credits available to reduce income taxes in future periods.  The credits expire from 2032-2035.  In addition, at December 31, 2015, the Company had approximately $370,000 of net operating loss carryforwards which will expire between 2016 and 2035.

The components of deferred tax assets and liabilities at December 31, were as follows:

	2015	2014
Deferred tax assets, net:
Current:
Accrued liabilities	$          6,957	$           8,776
Inventories	17,560	40,824
Total current deferred tax assets	24,517	49,600
Noncurrent:
Income tax credits	55,853	29,899
Net operating loss carryforwards	126,942
Other		1,402
Total noncurrent deferred tax assets	182,795	31,301
Less valuation allowance	(38,920)
Total deferred tax assets, net	$     143,875	$         31,301

The Company has recorded a net deferred tax asset of $143,875 after a valuation allowance of $38,920 that reflects the benefit of $370,000 in loss carryforwards, which expire in varying amounts as described above, and research and development income tax credits of $55,853.  Realization of the deferred tax asset is dependent on generating sufficient taxable income prior to expiration of the loss carryforwards and the income tax carryforwards.  Although realization is not assured, management believes it is more likely than not that all of the deferred tax asset will be realized.  The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

The differences between the benefit for income taxes and income taxes computed using the U.S. statutory federal income tax rate of 35% were as follows:

	2015	2014
Amount computed using the statutory rate	$      (114,395)	$          (53,870)
Permanent differences	5,418	1,748
Income tax credits	(18,413)
Change in valuation allowance	38,920	-
Benefit for federal income taxes	$         (88,470)	$          (52,122)

Should the Company have future accrued interest expense and penalties related to uncertain income tax positions, they will recognize those expenses in income tax expense.

The Company files federal income tax returns in the United States only.  The Company is no longer subject to federal income tax examination by tax authorities for years before 2012.  The Company has evaluated all tax positions for open years and has concluded that they have no material unrecognized tax benefits or penalties.