Annual report pursuant to Section 13 and 15(d)


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



Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company has evaluated Staff Accounting Bulletin No. 118 regarding the impact of the decreased tax rates of the Tax Cuts & Jobs Act. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate of 26% is being used due to the new tax law recently enacted.


Net deferred tax assets consist of the following components as of December 31:


    2017   2016
Deferred Tax Assets:                
NOL Carryover   $ 1,212,100     $ 1,691,400  
Related party accrual     75,400       500  
Product returns & allowance     —         —    
      Payroll accrual     7,800       34,300  
Deferred tax liabilities:                
      Depreciation     (3,300 )     (13,200 )
Less valuation allowance     (1,292,000 )     (1,713,000 )
Net deferred tax assets   $ —       $ —    


The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the period ended December 31, due to the following:


    2017   2016
Book loss   $ (189,400 )   $ (305,900 )
Meals and entertainment     1,400       2,600  
Depreciation     (1,100 )     1,200  
Other nondeductible expenses     44,600       7,000  
Related party accruals     75,000       (900 )
Accrued payroll     58,900       58,900  
Valuation allowance     10,600       489,900  
    $ —       $ —    


At December 31, 2017, the Company had net operating loss carry forwards of approximately $4,662,000 that may be offset against future taxable income from the year 2017 to 2035. 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. With few exceptions, the Company is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before 2012.