INCOME TAXES

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

INCOME TAXES

The Company accounts for income taxes under ASC No. 740 (ASC 740). This statement mandates the liability method of accounting for deferred income taxes and permits the recognition of deferred tax assets subject to an ongoing assessment of realizability.

As of December 31, 2010, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $13,100,000 that may be offset against future taxable income through 2030. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount.

	2010			2009
Net Operating Losses	$	4,454,000		$	4,386,000
Accrued Consulting Fees		123,000			62,000
Valuation Allowance		(4,577,000	)		(4,448,000	)
	$	—		$	—

The provision for income taxes differ from the amount computed using the federal US statutory income tax rate as follows:

	2010			2009
Provision (Benefit) at US Statutory Rate	$	(86,076	)	$	(116,394	)
Stock Compensation / Interest		17,340			4,250
Accrued Consulting Fees		19,380			28,849
Other		(79,644	)		50,295
Increase (Decrease) in Valuation Allowance		129,000			33,000
	$	—		$	—

The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income.