NOTE 11 – INCOME TAXES
The provision for income taxes for the year ended December 31, 2017 and 2016 consists of the following:
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Federal | ||||||||
| Current | $ | - | $ | - | ||||
| Deferred | - | - | ||||||
| State | ||||||||
| Current | $ | 800 | $ | 800 | ||||
| Deferred | - | - | ||||||
| Income tax expense | $ | 800 | $ | 800 | ||||
Net deferred tax assets consist of the following components as of December 31, 2017 and 2016:
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Deferred tax assets: | ||||||||
| Net operating loss carryover | $ | 6,239,260 | $ | 5,772,304 | ||||
| Research and development carry forward | 136,465 | 136,465 | ||||||
| Related party accruals | 130,538 | 130,538 | ||||||
| Inventory reserve | 252,958 | 203,549 | ||||||
| Allowance for doubtful accounts | 33,605 | 33,605 | ||||||
| Accrued compensation | 158,668 | 36,919 | ||||||
| Deferred tax liabilities: | ||||||||
| Depreciation | (104,924) | (111,214) | ||||||
| Deferred rent | (1,505) | (4,746) | ||||||
| Warranty allowance | 4,986 | (4,986) | ||||||
| Valuation allowance | (6,850,051 | ) | (6,192,434 | ) | ||||
| Net deferred tax asset | $ | - | $ | - | ||||
The income tax provision differs from the amount of income tax determined by applying the estimated U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the year ended December 31, 2017 and 2016 due to the following:
| December 31, | December 31, | |||||||
| 2017 | 2016 | |||||||
| Book loss | $ | (404,157 | ) | $ | (351,544 | ) | ||
| Meals and entertainment | 64 | 259 | ||||||
| State tax deduction | - | - | ||||||
| Deferred rent | (3,241) | (1,382) | ||||||
| Stock/Options for services | 51,294 | 75,754 | ||||||
| Officer’s life ins premium | 1,918 | 921 | ||||||
| Depreciation | (6,290) | (6,058) | ||||||
| Accrued compensation | 67,274 | 48,994 | ||||||
| Inventory reserve | 119,129 | 36,518 | ||||||
| Warranty allowance | - | 4,986 | ||||||
| Valuation allowance | 348,816 | 383,903 | ||||||
| Net operating loss carryover | (174,007) | (191,551 | ) | |||||
| Income Tax Expense | $ | 800 | $ | 800 | ||||
At December 31, 2017, the Company had net operating loss carry forwards of approximately $6,239,260 through 2034. No tax benefit has been reported in the December 31, 2017 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.