Entity information:
NOTE 5 – INCOME TAXES
 
The Company follows FASB ASC 740-10-10 whereby an entity recognizes deferred tax assets and liabilities for future tax consequences or events that have been previously recognized in the Company’s financial statements or tax returns. The measurement of deferred tax assets and liabilities is based on provisions of enacted tax law. The effects of future changes in tax laws or rates are not anticipated.
 
At December 31, 2016 the Company has a net operating loss (“NOL”) that approximates $32.0 million. Consequently, the Company may have NOL carryforwards available for federal income tax purposes, which would begin to expire in 2019. Due to changes in ownership, a portion of the NOL carryforward may be subject to certain annual limitations imposed under Section 382 of the Internal Revenue Code. Deferred tax assets would arise from the recognition of anticipated utilization of these net operating losses to offset future taxable income.
 
The income tax benefit (provision) consists of the following:
 
   
Year Ended
    
Year Ended
  
   
December 31,
    
December 31,
  
   
2016
    
2015
  
             
Current
  
$
(960,000
)
  
$
(1,802,000
)
Deferred
    
(431,000
)
    
(393,000
)
Change in valuation allowance
    
1,391,000
      
2,195,000
  
                 
   
$
-
    
$
-
  


The following is a reconciliation of the tax derived by applying the U.S. Federal Statutory Rate of 35% to the earnings before income taxes and comparing that to the recorded tax provisions:

   
2016
    
2015
  
   
Amount
    
%
    
Amount
    
%
  
U.S federal income tax benefit at federal statutory rate
  
$
(576,000
)
    
(35
)
  
$
(826,000
)
    
(50
)
State tax, net of federal tax effect
    
(99,000
)
    
(6
)
    
(138,000
)
    
(8
)
Non-deductible changes in derviative liability and share based transactions
    
(716,000
)
    
(43
)
    
(1,231,000
)
    
(75
)
Change in valuation allowance
    
1,391,000
      
84
      
2,195,000
      
133
  
                                 
   
$
-
      
-
    
$
-
      
-
  

The primary components of the Company’s December 31, 2016 and 2015 deferred tax assets, liabilities and related valuation allowance are as follows:
 
   
2016
    
2015
  
             
Deferred tax asset for NOL carryforwards
  
$
13,263,000
    
$
12,451,000
  
Deferred tax liability for intangibles
    
(165,000
)
    
(165,000
)
Share based compensation
    
5,165,000
      
4,588,000
  
Non deductible accrued expenses
    
12,000
      
10,000
  
Valuation allowance
    
(18,275,000
)
    
(16,884,000
)
                 
   
$
-
    
$
-
  

Management has determined that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the entire amount of such benefits.
 
The Company follows FASB ASC 740-10, which provides guidance for the recognition and measurement of certain tax positions in an enterprise’s financial statements. Recognition involves a determination whether it is more likely than not that a tax position will be sustained upon examination with the presumption that the tax position will be examined by the appropriate taxing authority having full knowledge of all relevant information.
 
The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the consolidated statement of operations. As of December 31, 2016 and 2015, the Company had no unrecognized tax benefits. There were no changes in the Company’s unrecognized tax benefits during the years ended December 31, 2016 and 2015. The Company did not recognize any interest or penalties during 2016 and 2015 related to unrecognized tax benefits.