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Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

NOTE 7 – INCOME TAXES

The components of loss before income taxes are as follows:

		2017				2016
Domestic			(2,134,722	)			(2,182,114	)
Foreign			(124,914	)			(93,712	)
Loss before income taxes			(2,259,636	)			(2,275,826	)

The Company had no income tax expense due to operating losses incurred for the years ended December 31, 2017 and 2016.

For the years ended December 31, 2017 and 2016, a reconciliation of the Company’s effective tax rate to the statutory U.S. Federal rate is as follows:

		2017				2016
Income taxes at Federal statutory rate			(34.0	)%			(34.0	)%
State income taxes, net of Federal income tax effect			(8.4	)%			(16.0	)%
Perm difference			0.0	%			(7.0	)%
Foreign tax rate differential			(0.2	)%			(0.2	)%
Change in valuation allowance			42.6	)%			50.4	%
Other			0.0	)%			6.8	%
Income tax provision			0.0	)%			0.0	%

In December 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act makes changes to U.S. tax law, including a reduction in the corporate tax rate from 35% to 21%. As a result of the enacted law, the Company was required to revalue deferred tax assets and liabilities at the enacted rate. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company has made reasonable estimates of the effects in its consolidated financial statements as of December 31, 2017. As the Company collects and prepares necessary data and interprets the Tax Act and any additional guidance issued by the U.S. Treasury Department, the IRS, the SEC, and other standard-setting bodies, it may make adjustments to the provisional amounts. The accounting for the tax effects of the Tax Act will be completed in 2018.

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

		2017				2016
U.S. net operating loss carryforwards			2,168,000				1,899,000
Stock compensation			472,000				449,000
Canadian Provincial income tax losses			123,000				116,000
Canadian Provincial scientific investment tax credits			-				56,000
			2,763,000				2,520,000
Valuation allowance			(2,763,000	)			(2,520,000	)
Net deferred tax assets			-				-

As of December 31, 2017 and 2016, the Company had federal net operating loss carryforwards (“NOL”) of approximately $5,287,000 and $4,338,000, 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, 2017 and 2016, the Company had state and local net operating loss carryforwards of approximately $5,272,000 and $4,331,000, respectively, to reduce future state tax liabilities also through 2035.

As of December 31, 2017 and 2016, the Company had Canadian NOL of approximately $1,002,000 and $771,000, respectively. The Canadian losses expire in stages beginning in 2026. As of December 31, 2017 and 2016, 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 $0 and $56,000 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, 2017 and 2016 was an increase of $243,000 and $1,148,000, 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, 2017 and 2016.

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.