| 11. | INCOME TAXES |
The Company computes income taxes using the asset and liability approach. The Company currently has no issue that creates timing differences that would mandate deferred tax expense. Due to the uncertainty as to the utilization of net operating loss carry forwards, a valuation allowance was made to the extent of any tax benefit that net operating losses may generate. No provision for income taxes was recorded for the year ended December 31, 2017 and 2016 due to the Company’s net operating loss carry forward from prior years.
The following table reconciles income tax expense and rate base on the statutory rate to the Company’s income tax expense.
| Year Ended December 31, 2017 | Year Ended December 31, 2016 | |||||||||||||||
| Amount | Percentage | Amount | Percentage | |||||||||||||
| Computed “expected” income tax benefit | $ | (484,984 | ) | 35.00 | $ | (623,914 | ) | 35.00 | ||||||||
| Increase (decrease) in income taxes resulting from: | ||||||||||||||||
| Expiration of unused net operating loss | — | — | — | — | ||||||||||||
| Permanent differences | — | — | — | — | ||||||||||||
| State taxes, net of federal benefit | — | — | 4,916 | (0.31 | ) | |||||||||||
| Changes in valuation allowance | 484,934 | (35.00 | ) | 623,914 | (35.00 | ) | ||||||||||
| Provision for federal and state income tax | $ | — | — | $ | 4,916 | (0.31 | ) | |||||||||
Deferred Income Taxes
Deferred income taxes primarily represent the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of our deferred taxes are as follows:
| Years Ended December 31, | ||||||||
| 2017 | 2016 | |||||||
| Deferred tax assets (liabilities): | ||||||||
| Net operating loss carryforward | $ | 21,330,000 | $ | 21,330,000 | ||||
| Expiration of unused net operating loss | — | — | ||||||
| Bad debt allowance | — | 51,263 | ||||||
| Stock based compensation | — | 290,100 | ||||||
| Gain on sale of assets | — | 710,142 | ||||||
| Depreciation and amortization | (4,898,818 | ) | (5,791,174 | ) | ||||
| Total deferred tax assets | 16,431,182 | 16,590,331 | ||||||
| Valuation allowance | (16,431,182 | ) | (16,590,331 | ) | ||||
| Net deferred tax assets | $ | — | $ | — | ||||
At December 31, 2017 and 2016, the Company has net operating loss carry forwards of approximately $30.9 million and $30.9 million, respectively, remaining for federal income tax purposes. Net operating loss carry forwards may be used in future years to offset taxable income subject to compliance with Section 382 of the Internal Revenue Code. The federal net operating loss carry forwards will expire in 2018 through 2035.