Entity information:
NOTE
7:
INCOME TAXES
 
 
 
The Company did
not
have material income tax provision (benefit) because of net loss and valuation allowances against deferred income tax provision for the years ended
December 31,
201
7
and
2016.
 
A reconciliation of the Company
’s effective tax rate to the statutory federal rate is as follows: 
 
   
Years Ended
December 31,
  
   
201
7
    
201
6
  
Statutory federal rate
    
21.0
%
    
34.0
%
State income taxes net of federal income tax benefit
    
0.0
%
    
0.0
%
Permanent differences for tax purposes
    
-0.3
%
    
-0.1
%
Federal rate reduction
    
-120.7
%
    
0.0
%
Change in valuation allowance
    
100.0
%
    
-40.0
%
Effective income tax rate:
    
0.0
%
    
-6.1
%
 
The income tax benefit differs from the amount computed by applying the U.S. federal statutory tax rate of
21%,
primarily due to the change in the valuation allowance and state income tax benefit, offset by nondeductible expenses.
 
Deferred income taxes reflect the net tax effects 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 the deferred tax assets and liabilities are as follows:  
 
   
December 31,
  
   
201
7
    
201
6
  
Deferred tax assets:
                
Net operating loss carryovers
   $
4,377,202
     $
6,017,984
  
Stock-based compensation
    
1,886,250
      
2,177,926
  
Other temporary differences
    
1,058,115
      
1,080,361
  
Total deferred tax assets
    
7,321,567
      
9,276,271
  
Valuation allowance
    
(7,321,567
)
    
(9,276,271
)
Net deferred tax asset
   $
-
     $
-
  
 
 
At
December 31,
201
7,
the Company had available net operating loss carryovers of approximately
$15.2
million that
may
be applied against future taxable income and expires at various dates between
2025
and
2037,
subject to certain limitations. The Company has a deferred tax asset arising substantially from the benefits of such net operating loss deduction and has recorded a valuation allowance for the full amount of this deferred tax asset since it is more likely than
not
that some or all of the deferred tax asset
may
not
be realized. The net change in the valuation allowance is primarily due to the net loss in
2017,
which increased net operating loss carryforward in
2017
compared to
2016.
 
The Company files income tax returns in the U.S. federal jurisdiction and California and is subject to income tax examinations by federal tax authorities for tax years ended
201
4
and later and by California authorities for tax years ended
2012
and later. The Company currently is
not
under examination by any tax authority. The Company’s policy is to record interest and penalties on uncertain tax positions as income tax expense. As of
December 31, 2017,
the Company has
no
accrued interest or penalties related to uncertain tax positions.