NOTE 7 - INCOME TAXES

The Company accounts for income taxes in accordance with Accounting Standards Codification (ASC-740) “Accounting for Income Taxes”, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and income tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

As of December 31, 2016, and December 31, 2015, we have NOL carryforwards of approximately $22,960,000 and $12,300,000, respectively, which, if unused, will expire in years 2034 through 2036. However, in accordance with IRC Section 382, the availability and utilization of these losses may be severely limited since the business combination that occurred on October 17, 2014 triggered the IRC Section 382 limitations.

Prior to October 17, 2014, the date of the reverse acquisition transaction discussed in Note 1 above, the operating entities were owned by unrelated third party partners/members, and as limited liability companies, the operating companies’ losses for the period January 1, 2014 to October 17, 2014 flowed through to such partners/members. Therefore, as there were no tax allocation arrangements with the previous partners/members, the Company has not recorded in these financials statements any current or deferred income tax expense, income tax liabilities or deferred tax assets/liabilities relating to such pre-acquisition activity (losses).

The table below summarizes the differences between the Company’s effective tax rate and the statutory federal rate of 35% as follows for the periods ended December 31, 2016 and 2015:

	Years Ended December 31,
	2016			2015
Computed "expected" benefit	$	(6,124,646	)	$	(6,538,843	)
Effect of state income taxes, net of federal benefit		(874,949	)		(769,276	)
Return to provision adjustments		(4,217,660	)		-
Stock compensation and other permanent difference		183,117			4,577,831
Increase in valuation allowance		11,227,620			2,730,288

Total Income Tax Expense	$	193,482		$	-

The net deferred income tax asset was comprised of the following:

	Years Ended December 31,
	2016			2015
Noncurrent deferred income taxes:
Gross assets	$	18,793,653		$	4,686,288
Gross liabilities		(18,987,135	)		(4,686,288	)
Net deferred income tax liability	$	(193,482	)	$	-

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different year for tax and financial reporting purposes. The Components of the net deferred tax assets for the years ended December 31, 2016 and 2015 were as follows:

	Years Ended December 31,
	2016			2015
Depreciation and Amortization	$	(43,498	)	$	-
Reserve for Doubtful Accounts		202,739			-
Other		1,348			-
Stock Compensation		5,830,565			-
Acquisition Related Costs		910,588			-
Unrealized Gain		(364,000	)		-
Net Operating Loss		9,182,684			4,686,288
Less: Valuation allowance		(15,913,908	)		(4,686,288	)
Net deferred income tax liability	$	(193,482	)	$	-