Note 8 – Income Taxes

Through December 31, 2016, the Company incurred net operating losses for federal tax purposes of approximately $38,500,000. The net operating loss carry forwards may be used to reduce taxable income through the years 2028 to 2036. The availability of the Company's net operating loss carry forwards is subject to limitation if there is a change in the ownership of the Company's stock of 50% or more.

A reconciliation of the expected tax computed at the statutory federal income tax rate to the provision for income taxes is as follows:

	2016		2015
Expected tax benefit at 34%	$	(3,799,000)	$	(2,685,000)
Change in valuation allowance		3,590,000		2,420,000
Other		209,000		265,000
Provision for income taxes	$	-	$	-

The net deferred tax asset at December 31, 2016 and 2015 was $13,090,000 and $9,500,000, respectively. In assessing the potential realization of these deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. At December 31, 2016 and 2015, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized and has therefore recorded an appropriate valuation allowance against deferred tax assets at such dates. Significant components of the deferred tax assets (liabilities), computed at the statutory federal tax rate of 34%, are approximately as follows:

	2016		2015
Net operating loss carry forwards	$	13,100,000	$	9,650,000
Accrued liabilities		250,000		140,000
Stock compensation		(260,000)		(270,000)
Depreciation		20,000		-
Prepaid expenses		(30,000)		(30,000)
Other		10,000		10,000
Deferred tax assets, net		13,090,000		9,500,000
Valuation allowance		(13,090,000)		(9,500,000)
Net deferred tax asset	$	-	$	-

Although the Company is not under examination, the tax years for 2013 and forward are subject to examination by United States tax authorities.

The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2016 and 2015, there were no accrued interest or penalties related to uncertain tax positions.