Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

Deferred tax assets (liabilities) are comprised of the following at December 31:

	2015	2014

Net operating loss carry forwards	$2,683,900	$1,633,500
Related party accrued expenses	348,000	281,000
Depreciation	(16,100)	(10,900)
Other	5,100	3,400
	3,020,900	1,907,000
Valuation allowance	(3,020,900)	(1,907,000)

Net deferred taxes	$-	$-

The difference between the income tax benefit in the accompanying statements of operations and the amount that would result if the U.S. Federal statutory rate were applied to pre-tax loss for the years ended December 31, 2015 and 2014 is as follows:

	2015	2014

Income tax benefit at statutory rate	$4,644,600	$2,427,600
Services paid with common stock	(143,800)	(838,000)
Interest and amortization	(486,100)	(450,600)
(Gain) loss on settlement of debt	35,600	(207,300)
Loss on derivative	(2,894,800)	(183,700)
Related party accruals	(67,000)	(77,100)
Depreciation	(100)	(1,900)
Other	(2,000)	(2,800)
Change in valuation allowance	(1,086,400)	(666,200)

	~	~

At December 31, 2015, we had a net operating loss carry forward available to offset future taxable income of approximately $7,818,000, which will expire at various dates through December 31, 2035. If substantial changes in our ownership should occur, there would also be an annual limitation of the amount of the net operating loss carry forward that could be utilized.

FASB ASC Topic 718-740, Income Taxes, requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position. If the more-likely-than-non threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements. We performed a review of our material tax positions in accordance with recognition and measurement standards established by ASC Topic 718-740. We have no unrecognized tax benefit that would affect the effective tax rate if recognized.

We classify interest and penalties arising from the underpayment of income taxes in our statements of under general and administrative expenses. As of December 31, 2015 and 2014, we had no accrued interest or penalties related to uncertain tax positions.

We file income tax returns in the U.S. federal jurisdiction. All U.S. federal net operating loss carry forwards through the year ended December 31, 2015 are subject to examination.