NOTE 5 – INCOME TAXES
The Company uses the liability method, whereby deferred taxes and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. On December 31 2013 and 2012, the Company has no tax liability. The net deferred tax asset generated by the loss carryforward has been fully reserved. The cumulative net operating loss carry-forward is approximately $13,000,000 at December 31, 2016, and will expire in the years 2026 through 2036.
At December 31, 2016 and 2015, deferred tax assets consisted of the following:
| 2016 | 2015 | |||||||
| Allowance for doubtful accounts | $ | — | $ | — | ||||
| Accrued expenses | — | — | ||||||
| Current deferred tax asset | — | — | ||||||
| Intangible and fixed assets | — | — | ||||||
| NOL carryforward | 4,657,000 | 4,525,000 | ||||||
| Long-term deferred tax asset | 4,657,000 | 4,525,000 | ||||||
| Total deferred tax asset | 4,657,000 | 4,525,000 | ||||||
| Less valuation allowance | (4,657,000 | ) | (4,525,000 | ) | ||||
| Net deferred tax asset | $ | — | $ | — | ||||
The benefit for income taxes differed from the amount computed using the U.S. federal income tax rate of 34% for December 31, 2016 and 2015 as follows:
| 2016 | 2015 | |||||||
| Income tax benefit (federal and state) | $ | (278,000) | $ | (6,468,000) | ||||
| Non-deductible items | 146,000 | 5,443,000 | ||||||
| State and other benefits included in valuation | — | — | ||||||
| Change in valuation allowance | 132,000 | 1,025,000 | ||||||
| Income tax benefit | — | — |
The utilization of the carryforwards is dependent upon the Company's ability to generate sufficient taxable income during the carryforward period. In addition, utilization of these carryforwards may be limited due to ownership changes as defined in the Internal Revenue Code.