NOTE 11. INCOME TAXES

Loss from operations before provision (benefit) for income taxes is summarized in the following table.

The income tax provision (benefit) is summarized in the following table.

The significant components of the deferred tax assets and liabilities are summarized below.

The Company has approximately $6,679,000, and $1,144,000 in federal U.S. and Canadian net operating loss carryforwards (“NOLs”), respectively, as well as $5,685,000 in U.S. state and $1,144,000 in Canadian provincial NOLs available to reduce future taxable income. These carryforwards begin to expire in year 2030. Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in the future and utilize the NOLs before they expire, the Company has recorded a valuation allowance to fully offset the NOLs, and the total net deferred tax assets, as well.

Internal Revenue Code Section 382 (“Section 382”) imposes limitations on the availability of a company’s net operating losses and other corporate tax attributes as certain significant ownership changes occur. As a result of the historical equity instrument issuances by the Company, a Section 382 ownership change may have occurred and a study will be required to determine the date of the ownership change, if any. The amount of the Company’s net operating losses and other tax attributes incurred prior to any ownership change may be limited based on the Company’s value. In addition, as a result of the Company’s acquisition of the shares of U-Vend Canada, the amount of U-Vend Canada’s NOLs incurred prior to the ownership change and those of its wholly-owned limited liability company, U-Vend USA LLC may be limited based on U-Vend Canada’s value at the date of acquisition. A full valuation allowance has been established for the Company’s deferred tax assets, including net operating losses and any other corporate tax attributes. 

During the years ended December 31, 2016 and 2015 the Company had no unrecognized tax benefits. The Company’s policy is to recognize interest accrued and penalties related to unrecognized tax benefits in tax expense.

The Company files income tax returns in the U.S. and Canada federal jurisdictions, the states of California, Florida, Illinois and New York, as well as the province of Ontario. The tax years 2013-2016 generally remain open to examination by the U.S. federal and state taxing authorities. In addition, the 2012 tax year is still open for the state of California, Canadian federal and province of Ontario taxing authorities.

A reconciliation of the income tax provision using the statutory U.S. income tax rate compared with the actual income tax provision reported on the consolidated statements of operations is summarized in the following table.