Note 10 – Income Taxes

Deferred income taxes are provided based on the provisions of ASC Topic 740, “Accounting for Income Taxes”, to reflect the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

Significant components of the Company’s net deferred income taxes are as follows:

A reconciliation of the U.S. statutory federal income tax rate to the effective income tax rate (benefit) follows:

In assessing the ability to realize a portion of the deferred tax assets, management considers whether it is more than likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the 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 and projected future taxable income in making the assessment. After consideration of the evidence, both positive and negative, management has determined that a $4,063,436 valuation allowance at December 31, 2016 is necessary. The change in the valuation allowance for the current year is $81,304, which represents the changes in the deferred items. At December 31, 2016, the Company has available net operating loss carry forwards for federal income tax purposes of $6,289,635 expiring at various times from 2027 through 2032.

Valuation and Qualifying Accounts