NOTE 7.  Income Taxes

The Company recognizes deferred tax assets and liabilities based on estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. In addition, future tax benefits, such as those from net operating loss carry forwards, are recognized to the extent that realization of such benefits is more likely than not. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. At December 31, 2016 and 2015, the Company had net deferred tax assets which relate to the Company's net operating loss carry forwards less deferred tax liabilities related to unrealized gains on its MacuCLEAR investment shares.  At December 31, 2016, the remaining net operating loss totaled approximately $454,324 which will expire through 2036.  This deferred tax asset has been fully offset by a valuation reserve.   The Company does not have any other deferred tax assets or liabilities. 

The Tax Reform Act of 1986 imposed substantial restrictions of the utilization of net operating loss and tax credit carry forwards in the event of an "ownership change" as defined by the Section 382 of the Internal Revenue Code of 1986. If the Company has an "ownership change" as defined by the Internal Revenue Code of 1986, the Company's ability to utilize the net operating losses could be reduced.  A reconciliation of income tax expense at the statutory federal rate of 34% to income tax expense at the Company's effective tax rate for the years ended December 31, 2016 and 2015 is as follows: 

The Company uses the accrual method of accounting for income tax reporting purposes. At December 31, 2016 and 2015, the significant components of the Company's deferred tax assets (benefits) and liabilities are summarized as follows: