Income Taxes

6 Months Ended

Jun. 30, 2015

Notes to Financial Statements

Note 14 - Income Tax

14.       Income Taxes

The Company computes and records taxes payable based upon determination of taxable income which is different from pre-tax financial statement income.  Such differences arise from the reporting of financial statement amounts in different periods for tax purposes.  The timing differences are a result of different accounting methods being used for financial and tax reporting.

The Company’s total deferred tax assets and deferred tax liabilities were as follows at June 30, 2015 and December 31, 2014:

	June 30, 2015			December 31, 2014
Deferred tax assets:
Non-benefited  tax losses and credits	$	103,347		$	28,024,755
Total deferred tax assets		103,347			28,024,755
Deferred tax liabilities		-			-
Net book value of assets		-			-
Total deferred tax liabilities		-			-
Total net deferred tax assets		103,347			28,024,755
Valuation allowance		(103,347	)		(28,024,755	)
Net deferred tax assets	$	-		$	-

A valuation allowance has been established against the realization of the deferred tax assets since the Company has determined that the operating loss carryforwards may not be realized. The Company has federal and state net operating loss carryforwards of approximately $103,347 expiring in 2035.

Internal Revenue Code Section 382 imposes limitation on our ability to utilize net operating losses if we experience an ownership change and for the NOL’s acquired in the acquisitions of subsidiaries.  An ownership change may result from transactions increasing the ownership percentage of 5% or greater stockholders in the stock of the corporation by more than 50 percentage points over a three-year period.  The value of the stock at the time of an ownership change is multiplied by the applicable long-term tax exempt interest rate to calculate the annual limitation.  Any unused annual limitation may be carried over to later years. The Company in June 2012 and March 2015 experienced a greater than 50% ownership change, so the rules of IRC section 382 apply.

At June 30, 2015 and December 31, 2014, the amount of gross unrecognized tax benefits before valuation allowances and the amount that would favorably affect the effective income tax rate in future periods after valuation allowances were zero.