Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.7.0.1
Income Taxes
12 Months Ended
Dec. 31, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 7 – INCOME TAXES

 

A reconciliation of the differences between the effective income tax rates and the statutory federal tax rates for the years ended December 31, 2016 and 2015 (computed by applying the U.S. Federal corporate tax rate of 34 percent to the loss before taxes) is as follows:

 

    2016     2015  
Tax benefit at U.S. statutory rate   $ 509,226     $ 1,202,247  
State taxes, net of federal benefit            
Stock and stock based compensation     (362,519 )     (350,942 )
Net derivative expenses     274,724       (44,659 )
Amortization of preferred stock discount     (46,779 )     (4,587 )
Other permanent differences     (24,877 )     (1,213 )
Increase in valuation allowance     (349,775 )     (800,846 )
    $     $  

 

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and liabilities for the years ended December 31, 2016 and 2015 consisted of the following:

 

    2016     2015  
Net operating loss carry-forward   $ 1,410,055     $ 1,165,617  
Deferred tax assets – accrued salaries     79,412       (14,656 )
Deferred tax assets – accrued interest     11,269        
Depreciation expense     509       509  
Net deferred tax assets     1,501,245       1,151,470  
Valuation allowance     (1,501,245 )     (1,151,470 )
Total net deferred tax asset   $     $  

 

At December 31, 2016 and 2015, the Company had net deferred tax assets of $1,501,245 and $1,151,470 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, 2016 and 2015. At December 31, 2016, the Company has net operating loss carry forwards totaling $4,766,850, 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, 2016 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.