10 INCOME TAXES
The income tax provision (benefit) consists of the following:
| 2016 | 2015 | |||||||
| Federal: | ||||||||
| Current | $ | - | $ | - | ||||
| Deferred | (1,267,100 | ) | (454,300 | ) | ||||
| Change in valuation allowance | 1,267,100 | 454,300 | ||||||
| $ | - | $ | - | |||||
The Company’s income is earned in Nevada, and is thus not subject to state income tax.
The expected tax benefit based on the statutory rate is reconciled with actual tax benefit as follows:
| 2016 | 2015 | |||||||
| U.S. federal statutory rate | -34.0 | % | -34.0 | % | ||||
| State income tax, net of federal benefit | 0.0 | % | 0.0 | % | ||||
| Increase in valuation allowance | 34.0 | % | 34.0 | % | ||||
| 0.0 | % | 0.0 | % | |||||
Deferred tax assets consist of the effects of temporary differences attributable to the following:
| 2016 | 2015 | |||||||
| Deferred tax assets | ||||||||
| Net operating losses | $ | 1,621,400 | $ | 443,400 | ||||
| Option compensation accrual | 102,400 | 13,300 | ||||||
| Deferred tax assets | 1,723,800 | 456,700 | ||||||
| Valuation allowance | (1,723,800 | ) | (456,700 | ) | ||||
| Deferred tax assets, net of valuation allowance | $ | - | $ | - | ||||
The Company has approximately $4,768,000 of net operating losses (“NOL”) carried forward to offset taxable income in future years which expire commencing in fiscal 2034. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax assets relating to NOLs for every period because it is more likely than not that all of the deferred tax assets will not be realized.