Annual report pursuant to Section 13 and 15(d)

Income tax

Income tax

12 Months Ended

Dec. 31, 2015

Note 15 - Income tax

The Company and its subsidiary, WCI, are taxed as C-Corporations for federal income tax purposes. CAST and MCB are LLCs which are disregarded entities for income tax purposes, therefore, CAST’s and MCB’s taxable income or loss is reported by their respective shareholders.

The provision (benefit) for income taxes for the years ended December 31, 2015 and 2014 consist of the following:


		2015		2014
Current:
Federal	$	-	$	35,020
State		3,163		800
		3,163		35,820
Deferred:
Federal		364,700		359,106
State		83,000		157,851
Change in valuation		(447,700)		(516,957)
Total provision (benefit)	$	3,163	$	35,820

The Company has net deferred tax assets resulting from a timing difference in recognition of deferred revenue and from net operating loss carryforwards.

At December 31, 2015, the Company had approximately $4,500,000 of federal net operating loss carryforwards that begin expiring in 2032, $3,170,000 of California net operating loss carryforwards that begin expiring in 2022, $1,680,000 of Arizona net operating loss carryforwards that begin expiring in 2027 and $35,000 of Georgia net operating loss carryforwards that begin expiring in 2035.

The income tax provision (benefit) differs from the amount computed by applying the US federal income tax rate of 34% to net income (loss) before income taxes for the years ended December 31, 2015 and 2014 as a result of the following:


		2015		2014
Net income (loss) before taxes	$	(774,195)	$	(465,126)
US federal income tax rate		34%		34%

Computed expected tax provision (benefit)		(263,226)		(158,143)
Permanent differences and other		(184,474)		(167,038)
WCI net operating losses at January 1, 2014 included in change in valuation allowance		-		(616,994)
Change in valuation		447,700		976,100
Federal income tax provision	$	-	$	33,925

The significant components of deferred income tax assets as of December 31, 2015 and 2014 after applying enacted corporate income tax rates are as follows:


		2015		2014

Net Operating Losses carried forward	$	1,967,000	$	1,639,800
Deferred revenue, deferred officer bonus, and other		188,700		68,200
Valuation allowance		(2,155,700)		(1,708,000)
	$	-	$	-