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Note 8 - Income Taxes
 12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Income Tax Disclosure [Text Block]
NOTE
8
–
INCOME TAXES
 
The components of (loss) income before income taxes are as follows:
 
 
 
201
6
 
 
201
5
 
Domestic
    
(2,182,114
)
    
(747,693
)
Foreign
    
(93,712
)
    
(275,729
)
(Loss) income before income taxes
    
(2,275,826
)
    
(1,023,422
)
 
The Company had no income tax expense due to operating losses incurred for the years ended
December
31,
2016
and
2015.
 
For the years ended
December
31,
2016
and
2015,
a reconciliation of the Company’s effective tax rate to the statutory U.S. Federal rate is as follows:
 
 
 
201
6
 
 
201
5
 
Income taxes at Federal statutory rate
    
(34.0
%)
    
(34.0
%)
State income taxes, net of Federal income tax effect
    
(16.0
%
)
    
(13.0
%)
Perm difference
    
(7.0
%
)
    
0.0
%
Foreign tax rate differential
    
(0.2
%
)
    
2.4
%
Change in valuation allowance
    
50.4
%
    
43.5
%
Other
    
6.8
%
    
1.1
%
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:
 
 
 
 
201
6
 
 
201
5
 
U.S. net operating loss carryforwards
    
1,733,000
      
563,000
  
Stock compensation
    
(29,000
)
    
206,000
  
Canadian Provincial income tax losses
    
116,000
      
402,000
  
Canadian Provincial scientific investment tax credits
    
56,000
      
201,000
  
     
1,876,000
      
1,372,000
  
Valuation allowance
    
(1,876,000
)
    
(1,372,000
)
Net deferred tax assets
    
-
      
-
  
 
As of
December
31,
2016
and
2015,
the Company had federal net operating loss carryforwards (“NOL”) of approximately
$4,035,000
and
$1,310,000,
respectively. The losses expire 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,
2016
and
2015,
the Company had state and local net operating loss carryforwards of approximately
$4,027,000
and
$1,303,000,
respectively, to reduce future state tax liabilities also through
2035.
 
As of
December
31,
2016
and
2015,
the Company had Canadian NOL of approximately
$1,174,000
and
$1,256,000,
respectively. The Canadian losses expire in stages beginning in
2026.
As of
December
31,
2016
and
2015,
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
$56,000
and
$201,000,
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,
2016
and
2015
was an increase of
$242,000
and
$445,000,
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,
2016
and
2015.
 
 
The Company is required to file U.S. federal and state income tax returns. These returns are subject to audit by tax authorities beginning with the year ended
December
31,
2013.