INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

NOTE 9 - INCOME TAXES:

The components of income tax expense (benefit) related to income (loss) from operations are as follows:

	Years Ended December 31,
	2016			2015
Current:
Federal	$	—		$	5,272
State		37,437			64,948
Deferred:
Federal		(340,183	)		244,737
State		(49,488	)		30,983
	$	(352,234	)	$	345,940

The following is a reconciliation of the maximum statutory federal tax rate to the Company’s effective tax relative to operations:

	Years Ended December 31,
	2016			2015
	% of			% of
	Pre Tax			Pre Tax
	Earnings			Earnings
Statutory federal income tax rate		(34.0	)%		34.0	%
Statutory state income tax rate		(6.0	)		6.0
State income tax net of federal tax benefit		7.7			3.6
Net change in valuation allowance		11.9			—
Permanent differences		6.9			1.8
Other		(2.6	)		2.5
		(16.1	)%		47.9	%

In 2016 and 2015, the difference between the statutory and the effective tax rate is primarily due to a change in valuation allowance and a current provision for state income taxes, respectively.

The components of deferred income taxes are as follows:

	December 31,
	2016			2015
Deferred tax assets:
Uniform capitalization of inventory costs for tax purposes	$	166,017		$	158,599
Reserves on inventories		619,636			444,115
Reserves on product returns		48,564			—
Accruals		—			10,000
Tax effect of goodwill		(540,557	)		(507,524	)
Book depreciation over tax		(121,890	)		(43,514	)
Other timing differences		135,156			105,725
Net operating loss carryforward		12,559,023			11,035,216
		12,865,949			11,202,617
Valuation allowance for deferred tax assets		(5,462,349	)		(4,188,688	)
	$	7,403,600		$	7,013,929

The Company has a domestic federal and state net operating loss carryforward at December 31, 2016 of approximately $17,500,000 and $42,300,000, respectively, which expires in 2029. The Company also has a foreign net operating loss carryforward at December 31, 2016 of approximately Euro 12,900,000 and approximately Euro 12,400,000 for German corporate tax and German trade tax purposes, respectively.

Realization of the Company’s deferred tax assets is dependent upon the Company generating sufficient taxable income in the appropriate tax jurisdictions in future years to obtain benefit from the reversal of net deductible temporary differences and from utilization of net operating losses. The Company’s valuation allowances of $5,462,349 and $4,188,688 at December 31, 2016 and 2015, respectively, are primarily associated with the Company’s foreign net operating loss carryforward from an inactive foreign entity which is unlikely to be realized in future periods. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are changed. As of December 31, 2016, management believes that is more likely than not that the Company will fully realize the benefits of its deferred tax assets associated with its domestic federal net operating loss carryforward.

The Company files income tax returns in its U.S. (federal and state of New Jersey) taxing jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal and state tax examinations in its major tax jurisdictions for periods before 2013.

The Company does not have any significant unrecognized tax positions and does not anticipate significant increase or decrease in unrecognized tax positions within the next twelve months.