Annual report pursuant to Section 13 and 15(d)

INCOME TAX

INCOME TAX

12 Months Ended

Dec. 31, 2015

NOTE 12 – INCOME TAX

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. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

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

	2015			2014
Deferred Tax Assets:
NOL Carryover		1,138,500		$	1,478,500
Related party accrual		1,300			1,600
Depreciation		3,600			(4,800	)
Payroll accrual		88,400			32,700
Deferred tax liabilities:
Allowance for doubtful accounts		2,300			—
Less valuation allowance		(1,234,100	)		(1,508,000	)
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:

	2015			2014
Book loss	$	(3,278,100	)	$	(672,500	)
Meals and entertainment		4,600			1,400
Depreciation		11,300			(7,400	)
Allowance for Doubtful Accounts		2,500			—
Other nondeductible expenses		2,921,400			182,900
Related party accruals		(400	)		(11,100	)
Accrued payroll		58,900			(7,400	)
Valuation allowance		279,800			514,100
	$	—		$	—

At December 31, 2015, the Company had net operating loss carry forwards of approximately $2,919,000 that may be offset against future taxable income from the year 2016 to 2035. No tax benefit has been reported in the December 31, 2015 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.