Annual report pursuant to Section 13 and 15(d)

Income tax

Income tax

12 Months Ended

Dec. 31, 2016

Note 15 - Income tax

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

The provision (benefit) for income taxes for the years ended December 31, 2016 and 2015 consist of the following:

		2016		2015
Current:
Federal	$	-	$	-
State		10,400		3,163
		10,400		3,163
Deferred:
Federal		237,100		364,700
State		61,800		83,000
Change in valuation		(298,900)		(447,700)
Total provision (benefit)	$	10,400	$	3,163

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, 2016, the Company had approximately $5,200,000 of federal net operating loss carryforwards that begin expiring in 2032, $3,900,000 of California net operating loss carryforwards that begin expiring in 2022, and $1,700,000 of Arizona net operating loss carryforwards that begin expiring in 2027.

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, 2016 and 2015 as a result of the following:

		2016		2015
Net income (loss) before taxes	$	(802,341)	$	(761,632)
US federal income tax rate		34%		34%

Computed expected tax provision (benefit)		(272,796)		(258,955)
Permanent differences and other		35,696		(105,745)
Change in valuation		237,100		364,700
Federal income tax provision	$	-	$	-

The significant components of deferred income tax assets as of December 31, 2016 and 2015 after applying enacted corporate income tax rates are as follows:

		2016		2015

Net Operating Losses carried forward	$	2,249,800	$	1,967,000
Deferred officer bonus and other		204,800		118,700
Valuation allowance		(2,454,600)		(2,155,700)
	$	-	$	-