Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Dec. 31, 2014

Note 9 – Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at December 31, 2014 and 2013 are as follows:

	2014			2013
Deferred tax assets:
Net operating losses	$	22,866,340		$	17,884,298
Less: valuation allowance		(22,866,340	)		(17,884,298	)

Deferred tax assets, net	$	-		$	-

As of December 31, 2014, for U.S. federal income tax reporting purposes, the Company has approximately $67.0 million of unused net operating losses (“NOLs”) available for carry forward to future years. The benefit from the carry forward of such NOLs will begin expiring during the year ended December 31, 2021. Because United States tax laws limit the time during which NOL carry forwards may be applied against future taxable income, the Company may be unable to take full advantage of its NOL for federal income tax purposes should the Company generate taxable income. Further, the benefit from utilization of NOLs carry forwards could be subject to limitations due to material ownership changes that could occur in the Company as it continues to raise additional capital. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain.

The difference between the income tax provision and the amount that would result if the U.S. Federal statutory rate of 34% were applied to pre-tax loss for the years ended December 31, 2014 and 2013 are as follows:

	For the years ended
	December 31, 2014					December 31, 2013

Federal income taxes at 34%	$	(8,393,753	)	(34.00	)%	$	(3,663,089	)	(34.00	)%
Stock-based compensation		2,135,414		8.65	%		163,519		1.52	%
Change in fair value of derivatives		750,073		3.04	%		1,420,993		13.19	%
Other		526,224		2.13	%		-		-	%
Change in valuation allowance		4,982,042		20.18	%		2,078,577		19.29	%

Provision for income tax	$	-		-		$	-		-

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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