Entity information:
Note 11 – Income Taxes
 
The Company uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During 2016 and 2015, the Company incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $2,484,507 and $2,181,398 at December 31, 2016 and 2015, respectively, and will begin to expire in the year 2031. 
 
The Company had deferred income tax assets as of December 31, 2016, and 2015 as follows:

 
 
 
December 31, 2016
  
December 31, 2015
 
Operating loss carryforwards before income tax
 
$
2,978,342
  
$
3,015,775
 
Stock-based compensation
  
-
   
(907,007
)
Amortization of debt discount
  
(166,693
)
  
(518,085
)
Derivative gain (loss)
  
(327,142
)
  
606,898
 
Common shares issued in error
  
-
   
(16,183
)
Net operating loss carryforwards
  
2,484,507
   
2,181,398
 
Expected recovery at statutory rate 34%
  
34
%
  
34
%
Loss carryforwards
  
844,700
   
741,700
 
Less - valuation allowance
  
(844,700
)
  
(741,700
)
Total net deferred tax assets
 
$
-
  
$
-
 
 
The Company has no tax position at December 31, 2016 and 2015 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the period presented. The Company had no accruals for interest and penalties at December 31, 2016 and 2015.
 
The Company recognized deferred tax assets and liabilities for both the expected impact of differences between the financial statements and the tax basis of assets and liabilities, and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards. The Company will establish a valuation allowance to reflect the likelihood of realization of deferred tax assets.
 
As of the date of this filing, the Company is delinquent in filing their tax returns, and there is uncertainty regarding potential penalties and interest.  The last return filed by the Company was December 31, 2012, and the Company has not accrued for any potential penalties or interest from that period forward.  The Company will need to file returns for the years ending December 31, 2013, 2014, 2015 and 2016, which are still open for examination.