Note 9 – Income Taxes

Deferred income taxes reflect the net tax effects of operating loss and tax credit carry forwards and temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Due to the uncertainty of the Company’s ability to realize the benefit of the deferred tax assets, the deferred tax assets are fully offset by a valuation allowance at December 31, 2016 and 2015.

Income tax expense for 2016 and 2015 is as follows:

The following is a summary of the Company’s deferred tax assets at December 31, 2016 and 2015:

A reconciliation between the expected tax expense (benefit) and the effective tax rate for the years ended December 31, 2016 and 2015 are as follows:

As of December 31, 2016, the Company had a tax net operating loss carry forward of approximately $5,836,000. Any unused portion of this carry forward expires in 2031. Utilization of this loss may be limited in the event of an ownership change pursuant to IRS Section 382.