Note 10 — Income Taxes
The Company did not incur any federal or state income tax expense or benefit for the years ended December 31, 2016 and 2015.
The provision for income taxes differs from the amounts which would result from applying the federal statutory rate of 34% to the Company’s loss before income taxes as follows:
| For the years ended December 31, | |||||||
| 2016 | 2015 | ||||||
| Computed “expected” income tax benefit | $ | 32,147 | $ | (38,006) | |||
| State income tax benefit, net of federal benefit | 2,867 | (5,773) | |||||
| Change in valuation allowance | (35,047) | 70,007 | |||||
| Nondeductible expenses | 33 | 122 | |||||
| True-up of deferred tax asset for stock compensation | — | (26,350) | |||||
| Provision for income taxes | $ | — | $ | — | |||
Temporary differences that give rise to the components of deferred tax assets and liabilities are as follows:
| As of December 31, | ||||||
| 2016 | 2015 | |||||
| Deferred tax assets: | ||||||
| Deferred expenses | $ | 147,648 | $ | 174,384 | ||
| Net operating loss carry-forwards | 225,472 | 253,278 | ||||
| Accrued expenses | 5,531 | — | ||||
| Property and equipment | 27,740 | 14,492 | ||||
| Advance payment | 9,319 | 8,603 | ||||
| Deferred tax assets | 415,710 | 450,757 | ||||
| Less: Valuation allowance | (415,710) | (450,757) | ||||
| Net deferred tax assets | $ | — | $ | — | ||
As of December 31, 2016, the Company had net operating losses of approximately $608,000 for federal and state income tax purposes that can be carried forward for up to twenty years and deducted against future federal taxable income. The net operating loss carryforwards expire in various years through 2035. All of the federal and state net operating losses incurred prior to 2014 are subject to 100 percent limitation under the provisions of Internal Revenue Code section 382 due to an ownership change and the continuity of business requirement.
As of December 31, 2016 and 2015, management determined a valuation allowance against the net deferred tax assets of $415,710 and $450,757, respectively. In assessing the ability to realize a portion of the 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 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.
The Company files federal and state income tax returns. These returns remain subject to examination by taxing authorities for all years after December 31, 2012.