NOTE K – INCOME TAX

At December 31, 2016 and 2015 we had deferred tax assets principally arising from the net operating loss carry forwards for income tax purposes multiplied by an approximate expected rate of 38%. As management of the Company cannot determine that it is more likely than not that we will realize the benefit of the deferred tax assets, a valuation allowance equal to the deferred tax asset has been established at December 31, 2016 and 2015.

The significant components of the deferred tax asset at December 31, 2016 and 2015 were as follows:

The difference between income tax expense computed by applying the federal statutory corporate tax rate and actual income tax expense is as follows:

Deferred income taxes result from temporary differences in the recognition of income and expenses for the financial reporting purposes and for tax purposes. The effects of temporary differences that gave rise to deferred tax assets are as follows:

The Company has made a 100% valuation allowance of the deferred income tax asset at December 31, 2016, as it is not expected that the deferred tax assets will be realized. The Company has a net operating loss carryforward of $12,678,304 available to offset future taxable income through 2036.

The Company's federal income tax returns for the three years ended December 31, 2016 remains subject to examination by the Internal Revenue Services as of December 31, 2016.