(10) Income Taxes

12 Months Ended

Dec. 31, 2017

Notes

(10) Income Taxes:

(10)  Income Taxes:

The Company accounts for income taxes under FASB ASC 740 "Income Taxes."  Under the asset and liability method of FASB ASC 740, deferred tax assets and liabilities are recognized for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  The deferred tax assets of the Company relate primarily to operating loss carryforwards for federal income tax purposes. A full valuation allowance for deferred tax assets has been provided because the Company believes it is more likely than not that the deferred tax asset will be realized. Realization of deferred tax assets is dependent on the Company generating sufficient taxable income in future periods.

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Reform Act”) was signed into law by President Trump. The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018. U.S. GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted.

The Company periodically evaluates its tax positions to determine whether it is more likely than not that such positions would be sustained upon examination by a tax authority for all open tax years, as defined by the statute of limitations, based on their technical merits. As of December 31, 2017 and 2016, the Company has not established a liability for uncertain tax positions.

Any uncertain tax positions would be related to tax years that remain open and subject to examination by the relevant tax authorities.  The Company has no liabilities related to uncertain tax positions or unrecognized benefits as of the year end December 31, 2017 or 2016.  The Company has not accrued for interest or penalties associated with unrecognized tax liabilities.

As of December 31, 2017, the Company had  net operating loss carry forwards of approximately $6.4 million, which may be available to offset future taxable income for tax purposes.  This carry forward may be limited upon the ownership change under IRC Section 382.

The Components of the deferred tax asset at December 31, 2017 and 2016 are as follows:

		2017		2016
Net operating loss carry forward	$	1,346,000	$	870,000
Derivative expense		375,000		-
Total		1,721,000		870,000
Valuation allowance		(1,721,000)		(870,000)
Total Deferred tax asset	$	-	$	-

A reconciliation of the effective Federal tax expense to the amount derived by applying the Federal statutory rates to pretax loss for 2017:

Pretax loss at Federal Statutory rate of 35%	$	2,585,000
Non-deductible differences (stock-based compensation)		(1,166,000)
Change in valuation allowance		(851,000)
Effect of change in federal tax rates due to newly enacted tax statues		(568,000)
Net tax expense (benefit)	$	0

A reconciliation of the effective Federal tax expense to the amount derived by applying the Federal Statutory rate to pretax loss for 2016:    

Pretax loss at Federal Statutory rate of 35%	$	899,000
Non-deductible differences (stock based compensation)		(439,000)
Change in valuation allowance		(277,000)
Effect of change in federal tax rates due to newly enacted statutes		(183,000)
Net income tax expense (benefit)	$	0

The following tax years are open for examination by the Internal Revenue Service: 2015-2017.