Note 10 - Income Taxes

The income tax provision consists of federal and state corporate income taxes resulting from our operations in the United States. The income tax provision differs from the expected tax provisions computed by applying the U.S. Federal statutory rate to loss before income taxes primarily because we have historically maintained a full valuation allowance on our deferred tax assets. We expect income tax expense to vary each reporting period depending upon taxable income fluctuations and the availability of tax benefits from net loss carryforwards.

At December 31, 2014, we had available net operating loss carry forwards of $37.9 million that expire through 2034. Through the year ended December 31, 2014 the Company experienced a significant change in capital structure. As a result of the increase in shares outstanding, we believe that a greater than 50% change in ownership as defined in section 382 of the IRC has occurred and therefore our ability to utilize our net operating losses may be limited. We believe that a Sec. 382 study will confirm a change has occurred and therefore our ability to use our net operating losses will be limited on an annual basis based on the value of the Company at the time of the ownership change. Such limitation will have the effect of limiting on an annual basis the amount of net operating losses we can utilize as an offset to future taxable income.

At December 31, 2014, we recorded a valuation allowance against the full amount of our deferred tax assets, as our management believes it is uncertain that they will be fully realized. If we determine in the future that we will be able to realize all or a portion of our net operating loss, an adjustment to our net operating loss carryforwards would increase net income in the period in which we make such a determination.