NOTE 7 – INCOME TAXES

 A reconciliation of the differences between the effective income tax rates and the statutory federal tax rates for the year ended December 31, 2015 and 2014 (computed by applying the U.S. Federal corporate tax rate of 34 percent to the loss before taxes) is as follows:

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for the year ended December 31, 2015 and 2014 consisted of the following:

At December 31, 2015 and 2014, the Company had net deferred tax assets of $1,151,470 and $350,624 principally arising from net operating loss carry-forwards for income tax purposes. As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to the net deferred tax asset has been established at December 31, 2015 and 2014. At December 31, 2015, the Company has net operating loss carry forwards totaling approximately $3,428,285, which will begin to expire in 2034.

The Company’s NOL and tax credit carryovers may be significantly limited under the Internal Revenue Code (IRC). NOL and tax credit carryovers are limited under Section 382 when there is a significant “ownership change” as defined in the IRC.  During the year ended December 31, 2015 and in prior years, the Company may have experienced such ownership changes, which could impose such limitations.

The limitations imposed by the IRC would place an annual limitation on the amount of NOL and tax credit carryovers that can be utilized. When the Company completes the necessary studies, the amount of NOL carryovers available may be reduced significantly.  However, since the valuation allowance fully reserves for all available carryovers, the effect of the reduction would be offset by a reduction in the valuation allowance.