5. Income Taxes
At April 30, 2017, the Company had net operating loss carryforwards for Federal income tax purposes of approximately $2,100,000 expiring in the years of 2018 through 2033. Utilization of the net operating losses may be subject to annual limitations provided by Section 382 of the Internal Revenue Code and similar State provisions.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of April 30, 2017 and 2016 were as follows:
| 2017 | 2016 | |||||||
| Deferred tax assets, net: | ||||||||
| Net operating loss carryforwards | $ | 2,100,000 | $ | 1,700,000 | ||||
| Valuation allowance | 2,100,000 | 1,700,000 | ||||||
| Net deferred assets | $ | — | $ | — | ||||
The valuation allowance increased by $400,000 to $2,100,000 at April 30, 2017 from $1,700,000 at April 30, 2016.
The following is a reconciliation of the tax provisions for the years ended April 30, 2017 and 2016 with the statutory Federal income tax rates:
| Percentage of Pre-Tax Income | ||||||||
| 2017 | 2016 | |||||||
| Statutory Federal income tax rate | 34.0 | % | 34.0 | % | ||||
| Loss generating no tax benefit | (34.0 | ) | (34.0 | ) | ||||
| Effective tax rate | — | — | ||||||
The Company did not have any material unrecognized tax benefits as of April 30, 2017 and 2016. The Company does not expect the unrecognized tax benefits to significantly increase or decrease within the next twelve months. The Company recorded no interest and penalties relating to unrecognized tax benefits as of and during the years ended April 30, 2017 and 2016. The Company is subject to U.S. federal income tax, as well as taxes by various state jurisdictions. The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years ending April 30, 2014 through 2017.