Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

12. INCOME TAXES

The Company and its subsidiaries are subject to income taxes on income arising in, or derived from, the tax jurisdictions in which they operate. The Company is current with all its federal and state tax filings. The Company is open to examination for tax years 1998 through 2016 due to the carry back of net operating losses.

The following is a reconciliation of the federal statutory tax rate and the effective tax rate as a percentage for the years ended December 31:

	2016			2015
Statutory Federal Income Tax Rate		34	%		34	%
Warrant Liability		34			-
Effect of Valuation Allowance on Deferred Tax Assets		(34	)		(34	)
		-	%		-	%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

The components of deferred tax assets as of December 31 are as follows:

	2016			2015
Deferred Tax Assets:
Net Operating Loss Carryforwards	$	3,704,378		$	3,615,115
Capital Loss Carryforward		-			99,137
Discount on Note Receivable		-			109,976
Goodwill Impairment		595,154			595,154
Stock Based Compensation		182,541			-
Acquisition Costs		117,044			126,669
Other		135,792			-
		4,734,909			4,546,051
Deferred Tax Liabilities:
Bargain Purchase Gain		(1,020,000	)		(1,020,000	)
Property and Equipment		(237,967	)		(229,098	)
Other		(37,223	)		-
		(1,295,190	)		(1,249,098	)
Valuation Allowance		(3,439,719	)		(3,296,953	)
Net Deferred Tax Asset	$	-		$	-

The valuation allowance at December 31, 2016 and 2015 was primarily related to federal net operating loss carryforwards that, in the judgment of management, are not more-likely-than-not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of approximately $10,895,000 prior to the expiration of the net operating loss carryforwards beginning in 2018. Taxable income for the year ended December 31, 2016 approximated $263,000. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more-likely-than-not that the Company will not realize the benefits of these deductible differences, net of the existing valuation allowance at December 31, 2016.

When more than a 50% change in ownership occurs, over a three-year period, as defined, the Tax Reform Act of 1986 limits the utilization of net operating loss carry forwards in the years following the change in ownership. No determination has been made as of December 31, 2016, as to what implications, if any, there will be in the net operating loss carry forwards of the Company.