There is no current or deferred income tax expense or benefit for the years ended December 31, 2016 and 2015. The provision for income taxes is different from that which would be obtained by applying the statutory federal income tax rate to income before income taxes. The items causing this difference are as follows:
| Year ended December 31, | ||||||||
| 2016 | 2015 | |||||||
| Tax (benefit) at U.S. statutory rate | $ | (93,000 | ) | $ | (525,000 | ) | ||
| Research and development credits | (82,000 | ) | - | |||||
| State income tax (benefit), net of federal benefit | (10,000 | ) | (56,000 | ) | ||||
| Prior year true-up | 247,400 | - | ||||||
| Other adjustments | (1,400 | ) | (16,000 | ) | ||||
| Change in valuation allowance | (61,000 | ) | 597,000 | |||||
| $ | - | $ | - | |||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
| December 31, | ||||||||
| 2016 | 2015 | |||||||
| Deferred tax assets, current: | ||||||||
| Allowance for doubtful accounts | $ | 3,300 | $ | 3,100 | ||||
| Stock warrant consideration and other | 118,800 | 118,800 | ||||||
| Deferred revenue | - | 49,800 | ||||||
| Valuation allowance | (122,100 | ) | (171,700 | ) | ||||
| $ | - | $ | - | |||||
| Deferred tax assets, noncurrent: | ||||||||
| Deferred revenue | $ | - | $ | 661,600 | ||||
| Depreciation | 27,300 | 25,700 | ||||||
| Accrued deferred compensation payable | 575,900 | 493,800 | ||||||
| Research and development credit | 216,900 | 134,900 | ||||||
| Stock compensation | 105,800 | 105,300 | ||||||
| Net operating loss carryforward | 9,879,100 | 9,395,100 | ||||||
| Valuation allowance | (10,805,000 | ) | (10,816,400 | ) | ||||
| $ | - | $ | - | |||||
As of December 31, 2016 and 2015, the Company had federal
and state net operating loss carry-forwards totaling approximately $26,300,000 and $24,700,000, respectively, which expire through
2036. The Company has established a valuation allowance to fully reserve all deferred tax assets at December 31, 2016 and 2015
because it is more likely than not that the Company will not be able to utilize these assets. The change in the valuation allowance
for the years ended December 31, 2016 and 2015 was an increase of $61,000 and $597,000, respectively.
As of December 31, 2016, the Company has not performed an IRC Section 382 study to determine the amount, if any, of its net operating losses that may be limited as a result of the ownership change percentages during 2016. However, the Company will complete the study prior to the utilization of any of its recorded net operating losses.