4. Income Taxes

12 Months Ended

Dec. 31, 2016

Notes

4. Income Taxes

4.         Income Taxes

The benefit for federal income taxes consisted of:

	2016	2015
Deferred	$       75,700	$       88,470
Benefit for federal income taxes	$       75,700	$       88,470

At December 31, 2016, the Company had approximately $66,000 of research and development income tax credits available to reduce federal income taxes in future periods.  The credits expire from 2033-2036.  In addition, at December 31, 2016, the Company had approximately $531,000 of net operating loss carryforwards which will expire between 2033 and 2036.

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

	2016	2015
Accrued liabilities	$          7,892	$          6,957
Inventories	16,197	17,560
Federal income tax credits	66,353	55,853
Net operating loss carryforwards	201,029	126,942
Less valuation allowance	(47,379)	(38,920)
Total deferred tax assets, net	$     244,092	$     168,392

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 net deferred tax assets 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 federal income taxes and federal income taxes computed using the U.S. statutory federal income tax rate of 35% were as follows:

	2016	2015
Amount computed using the statutory rate	$         (75,739)	$      (114,395)
Other	2,080	5,418
Research and development credits	(10,500)	(18,413)
Change in valuation allowance	8,459	38,920
Benefit for federal income taxes	$         (75,700)	$         (88,470)

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 2013.  The Company has evaluated all tax positions for open years and has concluded that they have no material unrecognized tax benefits or penalties.