11. INCOME TAXES

6 Months Ended

Jun. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 11 – INCOME TAXES

At June 30, 2018 and December 31, 2017, the Company had approximately $17.3 million and $16.4 million, respectively, of net operating losses ("NOL") carry forwards for federal and state income tax purposes.  These losses are available for future years and expire through 2034.  Utilization of these losses may be severely or completely limited if the Company undergoes an ownership change pursuant to Internal Revenue Code Section 382.  

The provision for income taxes for continuing operations consists of the following components for the three-months ended June 30, 2018 and the year ended December 31, 2017:

	2018			2017
Current		$	-		$	-
Deferred			-			-
Total tax provision for (benefit from) income taxes		$	-		$	-

A comparison of the provision for income tax expense at the federal statutory rate of 21% for the three-months ended June 30, 2018 and the year ended December 31, 2017, the Company's effective rate is as follows:

	2018			2017
Federal statutory rate		(21.0	) %		(21.0	) %
State tax, net of federal benefit		(0.0	)		(0.0	)
Permanent differences and other including surtax exemption		0.0			0.0
Temporary difference		(15.9	)		(15.9	)
Valuation allowance		36.9			36.9
Effective tax rate		0.0	%		0.0	%

The net deferred tax assets and liabilities included in the financial statements consist of the following amounts at June 30, 2018 and December 31, 2017:

	2018			2017
Deferred tax assets
Net operating loss carry forwards	$	16,524,544		$	16,403,873
Deferred compensation		790,360			821,572
Stock based compensation		2,900,734			2,900,734
Other		581,639			581,639
Total		20,797,277			20,707,818
Less valuation allowance		(20,797,277	)		(20,707,818	)
Deferred tax asset		-			-
Deferred tax liabilities
Depreciation and amortization	$	-		$	-
Net long-term deferred tax asset	$	-		$	-

The change in the valuation allowance was $45,912 and $12,784,855 for the three-months ended June 30, 2018 and the year ended December 31, 2017, respectively.  The Company has recorded a 100% valuation allowance related to the deferred tax asset for the loss from operations, interest expense, interest income and other income subsequent to the change in ownership, which amounted to $20,797,277 and $20,707,818 at June 30, 2018 and December 31, 2017, respectively. 

Utilization of the Company’s net operating losses may be subject to substantial annual limitation if the Company experiences a 50% change in ownership, as provided by the Internal Revenue Code and similar state provisions.  Such an ownership change would substantially increase the possibility of net operating losses expiring before complete utilization.

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, historical taxable income including available net operating loss carry forwards to offset taxable income, and projected future taxable income in making this assessment.