Note 13 - Income Tax Provision
The Company did not record any income tax provision for the years ended December 31, 2016 and 2015 due to the Company’s net losses. The Company files income tax returns in the United States (“Federal“) and Florida (“State“) jurisdictions. The Company is subject to Federal and State income tax examinations by tax authorities for all years since its inception.
At December 31, 2016, the Company had Federal and State net operating loss carry forwards available to offset future taxable income of approximately $2.7 million. These carry forwards will begin to expire in the year ending December 31, 2017, subject to IRS limitations, including change in ownership.
The Company periodically evaluates the likelihood of the realization of deferred tax assets, and adjusts the carrying amount of the deferred tax assets by a valuation allowance to the extent the future realization of the deferred tax assets is not judged to be more likely than not. The Company considers many factors when assessing the likelihood of future realization of our deferred tax assets, including recent cumulative earnings experience by taxing jurisdiction, expectations of future taxable income or loss, the carry-forward periods available to us for tax reporting purposes, and other relevant factors.
At December 31, 2016, based on the weight of available evidence, including cumulative losses in recent years and expectations of future taxable income, the Company determined that it was more likely than not that its deferred tax assets of approximately $2.7 million would not be realized. Accordingly, the Company has recorded a valuation allowance for 100% of its cumulative deferred tax assets. The components of our deferred tax assets are as follows.
| For the year Ended | For the year Ended | |||||||
| December 31, 2016 | December 31, 2015 | |||||||
| Net Operating loss carryforwards | $ | 2,247,000 | $ | 1,551,000 | ||||
| Accrued Compensation | 183,000 | 50,000 | ||||||
| Impairment of goodwill | 128,000 | 128,000 | ||||||
| Stock based compensation and other | 108,000 | 360,000 | ||||||
| Total net deferred tax assets | 2,666,000 | 2,089,000 | ||||||
| Less valuation discount | (2,666,000 | ) | (2,089,000 | ) | ||||
| Net deferred tax assets | $ | - | $ | - | ||||
A reconciliation of income taxes with the amounts computed at the statutory federal rate are as follows:
| For the year Ended | For the year Ended | |||||||
| December 31, 2016 | December 31, 2015 | |||||||
| Computed tax provision (benefit) at | ||||||||
| federal statutory rate | -34 | % | -34 | % | ||||
| State income taxes, net of federal | ||||||||
| benefit | -6 | % | -6 | % | ||||
| Permanent differences | 83 | % | 59 | % | ||||
| Net Operating loss | -43 | % | -19 | % | ||||
| Income tax provision | 0 | % | 0 | % | ||||
As a result of the implementation of certain provisions of ASC 740-10, the Company performed an analysis of its previous tax filings and determined that there were no positions taken that it considered uncertain. Therefore, there were no unrecognized tax benefits as of December 31, 2016.
Future changes in the unrecognized tax benefit are not expected to have an impact on the effective tax rate due to the existence of the valuation allowance. The Company estimates that the unrecognized tax benefit will not change within the next twelve months. The Company will continue to classify income tax penalties and interest, if any, as part of interest and other expenses in its consolidated statements of operations. There are no interest or penalties accrued as of December 31, 2016.