Note 7 - Income Taxes

12 Months Ended

Dec. 31, 2015

NOTE 7 INCOME TAXES

The components of (loss) income before income taxes are as follows:

	2015			2014
Domestic		(747,693	)		16,001
Foreign		(275,729	)		(318,482	)
(Loss) income before income taxes		(1,023,422	)		(302,481	)

The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2015 and 2014.

For the periods ended December 31, 2015 and 2014, the actual tax expense differs from the effective tax expense (benefit) based on the U.S. Federal tax rate of 34% as follows:

	2015			2014
Income taxes at Federal statutory rate		-34.0	%		-34.0	%
State income taxes, net of Federal income tax effect		-13.0	%		-6.0	%
Foreign tax rate differential		2.4	%		0.0	%
Change in valuation allowance		43.5	%		40.0	%
Other		1.1	%		0.0	%
Income tax provision		0.0	%		0.0	%

The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities are as follows:

	2015			2014
U.S. net operating loss carryforwards		563,000			401,000
Stock compensation		206,000			-
Canadian Provincial income tax losses		402,000			333,000
Canadian Provincial scientific investment tax credits		201,000			193,000
		1,372,000			927,000
Valuation allowance		(1,372,000	)		(927,000	)
Net deferred tax assets		-			-

As of December 31, 2015 and 2014, the Company had federal net operating loss carryforwards (“NOL”) of approximately $1,310,000 and $1,041,000, respectively. The losses expire in stages beginning in 2024. The Company has not performed a detailed analysis to determine whether an ownership change under IRC Section 382 has occurred. The effect of an ownership change would be the imposition of annual limitation on the use of NOL carryforwards attributable to periods before the change Any limitation may result in expiration of a portion of the NOL before utilization. As of December 31, 2015 and 2014, the Company had state and local net operating loss carryforwards of approximately $1,303,000 and $1,033,000, respectively, to reduce future state tax liabilities also through 2035.

As of December 31, 2015 and 2014, the Company had Canadian NOL of approximately $1,256,000 and $980,000, respectively. The Canadian losses expire in stages beginning in 2026. As of December 31, 2015 and 2014, the Company also has unclaimed Canadian federal scientific research and development investment tax credits, which are available to reduce future federal taxes payable of approximately $201,000 and $193,000, respectively.

As a result of losses and uncertainty of future profit, the net deferred tax asset has been fully reserved. The net change in the valuation allowance during the years ended December 31, 2015 and 2014 was an increase of $445,000 and $67,000, respectively.

Foreign earnings are assumed to be permanently reinvested. U.S. Federal income taxes have not been provided on undistributed earnings of our foreign subsidiary.

The Company recognizes interest and penalties related to uncertain tax positions in selling, general and administrative expenses. The Company has not identified any uncertain tax positions requiring a reserve as of December 31, 2015 and 2014.