7. INCOME TAXES

At May 31, 2013, the Company has available unused net operating loss carryovers approximately $17,484,000 that may be applied against future taxable income and expire at various dates through 2033. The Company has a deferred tax asset arising from such net operating loss deductions and has recorded an increase to the full valuation allowance in the amount of $6,908,000 for the year ended May 31, 2013 since the likelihood of realization of the tax benefits cannot be determined.

	Year Ended May 31,
	2013		2012
Deferred tax asset:
Net operating loss carry forward	$	6,908,000	$	6,729,000
Accrued Compensation		1,420,000		1,420,000
Valuation allowance		(8,328,000)		(8,149,000)
Net deferred tax asset	$	—	$	—

A reconciliation of the statutory federal income tax benefit to actual tax benefit is as follows:

	Year Ended May 31,
	2013			2012
Statutory federal income tax benefit		(35)	%		35	%
Permanent timing differences - equity rights		4	%		(0)	%
Operating loss carry-forwards utilized		(31)	%		(35)	%
State income taxes		0	%		0	%

The Company may have had greater than 50% change in ownership of certain stock holdings by shareholders of the Company pursuant to Section 382 of the Internal Revenue Code, the net operating losses may be limited as to its utilization on an annual basis. Currently no such evaluation has been performed.

Tax returns for the years 2010 through 2013 remain subject to examination by relevant tax authorities.