Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  



The Company has no provision for income taxes during the year ended December 31, 2017 due to net loss incurred, and full valuation allowance on the net deferred tax assets. The provision for income taxes consists of the following for the year ended December 31, 2016:


    Years Ended December 31,  
    2017     2016  
Federal   $     $ (2,242,984 )
State           (573,700 )
Federal           (35,913 )
State           (8,450 )
Provision for income tax expense   $     $ (2,861,047 )


The reconciliation of the effective income tax rate to the federal statutory rate is as follows:


    Years Ended December 31,  
    2017     2016  
Federal income tax rate     (34 )%     34 %
State tax, net of federal benefit     (8 )%     8 %
Change in accrued liabilities     (9 )%     6 %
Change in valuation allowances     33 %     (9 )%
Effective income tax rate     %     39 %


Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2017 and 2016 are as follows: 


    December 31,
    December 31,
Deferred tax assets:                
Inventory reserves   $ 221,053     $ 105,000  
Accrued liabilities     138,160       209,084  
Deferred tax liability                
Accumulated depreciation     (145,935 )     (153,447 )
Net deferred tax assets     213,278       160,637  
Valuation allowance     (213,278 )      
Net deferred tax assets, net of valuation allowances   $     $ 160,637  


Effective January 1, 2007, the Company adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. At the date of adoption, and as of December 31, 2017 and 2016, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption.


The Company files income tax returns in the U.S. federal jurisdiction and various states. The Company is subject to U.S. federal or state income tax examinations by tax authorities for tax years after 2010.


The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2017 and 2016, the Company had no accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2010 through 2017 remain open to examination by the major taxing jurisdictions to which the Company is subject.


Authoritative guidance issued by the ASC Topic 740 – Income Taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.   The Company considers all evidence available when determining whether deferred tax assets are more likely-than-not to be realized, including projected future taxable income, scheduled reversals of deferred tax liabilities, prudent tax planning strategies, and recent financial operations.  The evaluation of this evidence requires significant judgement about the forecast of future taxable income is consistent with the plans and estimates we are using to manage the underlying business.    Based on their evaluation, the Company determined that the net deferred tax assets of approximately $213,000 during 2017, do not meet the requirements to be realized, and as such, the Company has provided a full valuation allowance against them. 


At December 31, 2017, the Company had a refundable income taxes of $629,316 in the accompanying balance sheet.   This amount consisted of refunds of income taxes paid during the first half of 2017, and carry back claims of income taxes in two consecutive prior years.    At December 31, 2017, the Company had no federal net operating loss carry forwards, as carry back claims of income taxes paid from two consecutive prior years were applied to the Company’s net operating loss for the year ended December 31, 2017.