Note 8 – Income Taxes
The Company has net operating losses carried forward of approximately $3.3 million and $2.3 million as of December 31, 2016 and 2015, respectively, available to offset taxable income in future years which expire beginning in fiscal 2031.
The Company is subject to United States federal and state income taxes at an approximate rate of 45%. The reconciliation of the provision for income taxes at the United States federal statutory rate compared to the Company’s income tax expense as reported is as follows:
|
|
| December 31, 2016 |
|
| December 31, 2015 |
|
|
|
|
|
|
|
| Expected income tax at statutory rate | $ | (360,963) |
| $ | (263,898) |
| Permanent differences |
| 1,437 |
|
| 88,616 |
| Change in valuation allowance |
| 359,526 |
|
| 175,282 |
| Provision for income taxes | $ | – |
| $ | – |
The significant components of deferred income tax assets and liabilities at December 31, 2016 and 2015 are as follows:
|
|
| December 31, 2016 |
|
| December 31, 2015 |
|
|
|
|
|
|
|
| Net operating loss carry-forward | $ | 1,262,691 |
| $ | 1,021,679 |
| Valuation allowance |
| (1,262,691) |
|
| (1,021,679) |
| Net deferred income tax asset | $ | – |
| $ | – |
The valuation allowance has been established to offset the Companys net deferred tax assets, as realization of such assets is not considered to be more likely than not due to Companys history of losses and uncertainties regarding the Companys ability to generate future taxable income sufficient to realize the benefit of these deferred tax assets.
Pursuant to Section 382 of the Internal Revenue Code (the “Code”), annual use of the Companys NOL carryforwards may be limited in the event a cumulative change in ownership of 50% of certain shareholders occurs within a three year period. An ownership change may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain shareholders.
As of December 31, 2016 and December 31, 2015, the Company does not have any unrecognized tax benefits. The Company does not anticipate a significant increase in the unrecognized tax benefits over the next 12 months. The Companys policy is to recognize interest expense and penalties related to income matters as a component of the income tax provision. As of December 31, 2016 and December 31, 2015, the Company did not have any tax related accrued interest and penalties on its balance sheet or on its statement of operations.