Entity information:
NOTE 9 - INCOME TAXES
 
There is no current or deferred tax expense for the years ended December 31, 2016 and 2015 due to the Company’s loss position and the full reserve taken on the Company’s deferred tax asset in both years.
 
A reconciliation of statutory rates is as follows at December 31,:
 
 
 
2016
 
2015
 
Statutory rate
 
 
34.0
%
 
34.0
%
State income taxes, net of federal income tax benefit
 
 
3.6
%
 
5.0
%
Reduction for valuation allowance related to net operating loss carry-forwards and change in permanent differences
 
 
-37.6
%
 
-39.0
%
 
 
 
0.0
%
 
0.0
%
 
The tax effects of temporary differences that give rise to deferred tax assets (liabilities) are as follows at December 31,:
 
 
 
2016
 
2015
 
Deferred tax assets (liabilities):
 
 
 
 
 
 
 
Net operating loss carryforwards
 
$
20,381,000
 
$
18,898,000
 
Accumulated depreciation
 
 
15,000
 
 
4,000
 
Less valuation allowance
 
 
(20,396,000)
 
 
(18,902,000)
 
Net deferred tax assets
 
$
-
 
$
-
 
 
During the years ended December 31, 2016 and 2015, net deferred tax benefit was approximately $1,494,000 and $2,267,000, respectively. At December 31, 2016 and 2015, the Company had federal loss carryforwards of approximately $55.0 million and $50.4 million, respectively, and state loss carryforwards of approximately $27.1 million and $25.5 million, respectively, which may be available to reduce future taxes, if any. These net operating loss carryforwards expire starting in 2017 through 2036. The net change in the total valuation allowance for the years ended December 31, 2016 and 2015 was a net increase of approximately $1,494,000 and $2,267,000, respectively. Based on the Company’s loss position and the uncertainty of the amount and timing of future taxable income, management believes that it is more likely than not that the Company will not fully realize the benefit of its net deferred tax assets. Pursuant to Internal Revenue Code Section 382, annual utilization of the Company’s net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% is deemed to occur within any three-year period. The Company has not fully analyzed whether such limitation has occurred at this time as the deferred tax asset is fully reserved. However, given the equity issuances in 2015, it is likely that a section 382 limitation has been incurred.