NOTE 20. - INCOME TAXES

The following is a summary of the components giving rise to the income tax provision (benefit) for the years ended December 31, 2015, 2014 and 2013.

	2015		2014		2013

Current:
Federal	$	-	$	-	$	-
State		-		-		-
Total current		-		-		-

Deferred:
Federal		(3,372,964)		(3,494,787)		829,306
State		(155,352)		160,319		186,414
Total deferred		(3,528,316)		(3,334,468)		1,015,720
Change in valuation allowance		3,528,316		3,334,468		(1,015,720)
	$	-	$	-	$	-

The provision (benefit) for income tax varies from that which would be expected based on applying the statutory federal rate to pre-tax accounting loss as follows:

	2015			2014			2013

Statutory federal rate		(34.0)	%		(34.0)	%		(34.0)	%
Other items		0.0			0.6			1.9
Derivative liability		(0.5)			8.4			35.5
Stock based compensation		3.1			2.5			-
State tax provision, net of federal benefit		(0.9)			1.1			0.5
Valuation allowance		32.3			21.4			(3.9)

Effective tax rate (benefit) provision		0.0	%		0.0	%		0.0	%

Individual components of deferred taxes consist of the following as of December 31,:

	2015		2014		2013

Deferred tax assets:
Net operating loss carry-forward	$	7,745,734	$	4,775,536	$	2,616,624
Derivative liability		-		-		21,725
Accounts receivable reserve		3,499		-		-
Inventory reserve		38,707		17,713		19,584
Stock-based compensation		1,599,916		809,319		131,450
Start-up expenditures		514,680		388,130		-
Loss on equity investment		68,877		35,398		-
Severance liability		147,070		218,450		-
Other		9,272		6,561		1,292
		10,127,755		6,251,107		2,790,675
Deferred tax liabilities:
Inventory		-		-		(52,445)
Fixed assets		(227,186)		(80,251)		(2,956)
Patents and trademarks		(767,044)		(624,010)		(523,157)
Other intangible assets		(80,349)		(21,986)		-
		(1,074,579)		(726,247)		(578,558)
Valuation allowance		(9,053,176)		(5,524,860)		(2,212,117)

Net deferred taxes	$	-	$	-	$	-

The Company has incurred a net operating loss (“NOL”) of approximately $22,300,000 through December 31, 2015 and this amount is being carried forward to future years and begins to expire in 2031. Due to the uncertainty of the Company’s ability to generate sufficient taxable income in the future before they expire, the company has recorded a valuation allowance to reduce the net deferred tax asset to zero. This NOL is included in the net deferred tax asset that has been fully offset by the valuation allowance. Utilization of the NOL carryforwards may be subject to an annual limitation (or the NOL’s may expire unutilized) in the case of equity ownership changes, as defined by tax law.

ASC 740 provides guidance on the financial statement recognition and measurement for uncertain income tax positions that are taken or expected to be taken in a company’s income tax return. The Company has no uncertain tax positions as of December 31, 2015.