Entity information:
NOTE Q—INCOME TAXES
 
There was
no
provision for federal or state taxes as at
December
31,
2016
and
2015.
 
The Company has deferred taxes due to income tax credits, net operating loss carryforwards, and the effect of temporary differences between the carrying values of certain assets and liabilities for financial reporting and income tax purposes. Significant components of deferred taxes are as follows at
December
 
31:
 
   
 
 
2016
 
 
2015
 
                 
                 
Current asset:
 
 
 
 
 
 
 
 
Accrued compensation
   $
67,000
     $
75,000
  
Accounts receivable allowance
    
202,000
      
5,000
  
Non-current asset (liability):
 
 
 
 
 
 
 
 
Stock-based compensation
    
360,000
      
258,000
  
Basis differences in fixed assets
    
(8,000
)
    
(16,000
)
Basis differences in intangible assets
    
60,000
      
55,000
  
Net operating loss and credit carryforwards
    
18,597,000
      
17,994,000
  
Valuation allowances
    
(19,278,000
)
    
(18,371,000
)
                 
    $ —     $ —  
 
 
The Company has a valuation allowance against the full amount of its net deferred taxes due to the uncertainty of realization of the deferred tax assets due to operating loss history of the Company. The Company currently provides a valuation allowance against deferred taxes when it is more likely than not that some portion, or all of its deferred tax assets will not be realized. The valuation allowance could be reduced or eliminated based on future earnings and future estimates of taxable income. Similarly, income tax benefits related to stock options exercised have not been recognized in the financial statements.
 
As of
December
 
31,
2016,
the Company has federal net operating loss carryforwards of approximately
$54,300,000
subject to expiration between
2020
and
2036.
  These net operating loss carryforwards are subject to the limitations under Section 
382
of the Internal Revenue Code due to changes in the equity ownership of the Company.
 
A reconciliation of the effective income tax rate on operations reflected in the Statements of Operations to the US Federal statutory income tax rate is presented below.
 
 
 
2016
 
 
2015
 
                 
Federal statutory income tax rate
    
34
%
    
34
%
Permanent differences
    
—
      
—
)
Effect of net operating loss
    
(34
)
    
(34
)
                 
Effective tax rate
    
—
%
    
—
%
 
 
The Company has not been audited by the Internal Revenue Service (“IRS”) or any states in connection with income taxes. The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. The periods from
2013
through
2016
remain open to examination by the IRS and state jurisdictions. The Company believes it is not subject to any tax audit risk beyond those periods. The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company does
not
have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any significant interest expense recognized during the years ended
December
 
31,
2016
and
2015.