Note 6 - Income Taxes

Through December 31, 2015, the Company incurred net operating losses for federal tax purposes of approximately $28,300,000. The net operating loss carry forwards may be used to reduce taxable income through the years 2028 to 2035. The availability of the Company's net operating loss carry forwards is subject to limitation if there is a 50% or more change in the ownership of the Company's stock.

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

	2015		2014
Expected tax benefit at 34%	$	(1,797,000)	$	(2,481,000)
Change in valuation allowance		2,420,000		2,390,000
Other		(623,000)		91,000
Provision for income taxes	$	-	$	-

The net deferred tax asset at December 31, 2015 and 2014 was $9,500,000 and $7,080,000, respectively. A 100% valuation allowance has been established against the deferred tax assets as the utilization of the loss carry forward cannot reasonably be assured. Significant components of the deferred tax assets (liabilities), computed at the statutory federal tax rate of 34%, are approximately as follows:

	2015		2014
Net operating loss carry forwards	$	9,650,000	$	6,850,000
Accrued liabilities		140,000		310,000
Stock compensation		(270,000)		(20,000)
Depreciation		-		(40,000)
Prepaid expenses		(30,000)		(30,000)
Other		10,000		10,000
Deferred tax assets, net		9,500,000		7,080,000
Valuation allowance		(9,500,000)		(7,080,000)
Net deferred tax asset	$	-	$	-

Although the Company is not under examination, the tax years for 2012 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, 2015 and 2014, there was no accrued interest or penalties related to uncertain tax positions.