Note 8. Income Taxes.

No provision for U.S. federal or state income taxes has been recorded as the Company has incurred net operating losses since inception. Significant components of the Company's net deferred income tax assets as of March 31, 2015 and December 31, 2014 consist of the following:


	March 31, 2015			December 31, 2014
	(Unaudited)

Net deferred tax assets	$	2,185,000		$	1,331,000
Tax loss carry-forwards		—			—
Other assets		—			—
Research and development credits		—			—
Other liabilities		—			—
Valuation allowance		(2,185,000	)		(1,331,000	)
Total net deferred income taxes	$	—		$	—

A reconciliation of the statutory tax rates and the effective tax rates for the periods ended March 31, 2015 and December 31, 2014 is as follows:


	March 31, 2015			December 31, 2014
	(Unaudited)

U.S. federal tax rate		35	%		35	%
State tax rate		5	%		5	%
Non-deductible expenses		(16)	%		—	%
Valuation allowance		(24)	%		(40)	%
Total net deferred income taxes	$	—	%	$	—	%

Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carry-forward period. Due to the Company's history of operating losses, the deferred tax assets arising from the aforementioned future tax benefits are currently not likely to be realized and, accordingly, are offset by a full valuation allowance. The income tax provision varies from the expected provision determined by applying the federal statutory income tax rate to income (loss).

As of March 31, 2015 and December 31, 2014, the Company has net operating loss carry-forwards of approximately $5,500,000 and $3,300,000, respectively, available to offset federal and state income tax, which expire through 2034. Utilization of the net operating loss carry-forwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The effect of an ownership change could be an imposition of an annual limitation on the use of net operating loss carry-forwards attributable to periods before the change.