Note 11 — Income Taxes
Deferred Tax Assets
At December 31, 2016, the Company has available for federal income tax purposes a net operating loss (“NOL”) carry-forwards of approximately $9,000,000 that may be used to offset future taxable income through the fiscal year ending December 31, 2035. No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying consolidated financial statements since the Company believes that the realization of its net deferred tax asset of approximately $3,100,000 was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability. The valuation allowance changed by approximately $1,900,000 and $1,200,000 for the years ended December 31, 2016 and 2015, respectively.
Components of deferred tax assets are as follows:
| December 31, 2016 | December 31, 2015 | |||||||
| Net deferred tax assets – Non-current: | ||||||||
| Expected income tax benefit from NOL carry-forwards | $ | 3,100,000 | $ | 1,910,000 | ||||
| Less valuation allowance | (3,100,000 | ) | (1,910,000 | ) | ||||
| Deferred tax assets, net of valuation allowance | $ | - | $ | - | ||||
Income Tax Provision in the Consolidated Statements of Operations
A reconciliation of the federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
| For the Year Ended December 31, 2016 | For the Year Ended December 31, 2015 | |||||||
| Federal statutory income tax rate | 34.0 | % | 34.0 | % | ||||
| Change in valuation allowance on net operating loss carry-forwards | (34.0 | )% | (34.0 | )% | ||||
| Effective income tax rate | 0.0 | % | 0.0 | % | ||||