NOTE 15 – INCOME TAXES

The Company has incurred losses since its inception and, therefore, has not been subject to federal income taxes. As of December 31, 2016, the Company has net operating loss (“NOL”) carryforwards for income tax purposes of approximately $64,700,000 which expire in 2029 through 2036. Losses prior to 2009 have been lost due to mergers, dissolution of entities, etc. Under the provisions of Section 382 of the Internal Revenue Code greater than 50% ownership changes that occurred in the Company may significantly limit the Company’s ability to utilize its NOL carry forwards to reduce future taxable income and related tax liabilities.

Section 382 considers an owner shift any time there is a transfer of stock by a person who directly, or indirectly, owns more than 5% of the corporation and the percentage of stock of the corporation owned by one or more five percent shareholders has increased, in the aggregate, by more than 50 percentage points over the lowest percentage of stock owned by such shareholders at any time during the “testing period.” The “testing period” is generally a three-year period ending on the date of any owner or equity structure shift.

The amount of post-change income that may be offset by pre-change losses is limited each year by the “Section 382 Limitation.” Generally, the Section 382 Limitation is an amount equal to the market capitalization of the old loss corporation multiplied by a long-term interest rate established monthly by the Internal Revenue Service, which could significantly reduce or limit the annual amount of NOL utilization. The Company has not yet determined the qualifying events and resulting limitation that may impact utilization of net operating losses against future periods.

At December 31, 2016 and 2015, the net deferred tax asset based on a 34% tax rate consisted of the following:

	2016			2015

Net operating loss	$	22,000,000		$	21,046,000

Less: Valuation allowance		(22,000,000	)		(21,046,000	)

Net deferred tax asset	$	-		$	-

After evaluating our own potential tax uncertainties, the Company has determined that there are no material uncertain tax positions that have a greater than 50% likelihood of reversal if the Company were to be audited. Our tax returns for the years ended December 2013 - 2015 are subject to IRS audit.