| The Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefit of net operating losses have not been recognized in the consolidated financial statements because the Company cannot be assured that it is more likely than not that it will utilize the net operating losses carried forward in future years. The Company did not incur any income tax expense for the years ended December 31, 2016, and 2015. At December 31, 2016, $10,378,495 of federal and state net operating losses were available to the Company to offset future taxable income, which will expire commencing in 2030. Given the short history of the Company and the uncertainty as to the likelihood of future taxable income, the Company has recorded a 100% valuation reserve against the anticipated recovery from the use of the net operating losses created at the inception or generated thereafter. The Company will evaluate the appropriateness of the valuation allowance on an annual basis and adjust the allowance as considered necessary. There is a potential that the NOL not be able to be used. The company is currently evaluating the ability to use the NOL in future periods. |
| The components of the net deferred tax asset at December 31, 2016, and 2015, the statutory tax rate, the effective tax rate, and the amount of the valuation allowance are indicated below: |
December 31, 2016 |
December 31, 2015 |
|||||||
| Net operating loss carry forwards | $ | 6,407,215 | $ | 3,528,688 | ||||
| Valuation allowance | (6,407,215 | ) | (3,528,688 | ) | ||||
| Net deferred taxes | $ | - | $ | - | ||||
| The items accounting for the difference between income taxes computed at the statutory rates and the provisions for income taxes are as follows for the years ended December 31, 2016 and 2015: |
December 31, 2016 |
December 31, 2015 |
|||||||
| Net loss before taxes | $ | 13,501,927 | $ | 15,066,472 | ||||
| Statutory rate | 34 | % | 34 | % | ||||
| Computed expected tax (recovery) | $ | 4,590,655 | $ | 5,122,600 | ||||
| Depreciation | 2,252 | 1,897 | ||||||
| Accretion | 693,784 | 263,058 | ||||||
| Gain/Loss on derivatives and convertible notes | (14,166,232 | ) | (4,965,322 | ) | ||||
| Gain/Loss on write-down of assets and liabilities | 413,285 | (675,959 | ) | |||||
| Shares issuable for interest expense | - | 15,514 | ||||||
| Net operating loss | (8,466,256 | ) | 238,212 | |||||
| Valuation allowance | (8,466,256 | ) | (238,212 | ) | ||||
| Net deferred taxes | $ | - | $ | - | ||||
| The Company follows the provisions of FASB ASC Subtopic 740-10-65-1, Income Taxes. As of December 31, 2016, and 2015, the Company did not recognize any liability for unrecognized tax benefits. |