INCOME TAXES

12 Months Ended

May 31, 2012

INCOME TAXES [Abstract]

INCOME TAXES

7. INCOME TAXES

The Company has experienced losses since inception. As a result, it has incurred no income tax. The Internal Revenue Code allows net operating losses (NOL's) to be carried forward and applied against future profits for a period of twenty years; The Mexican equivalent of the Internal Revenue Code allows NOL's to be carried forward for ten years. The total of these NOL's at May 31, 2012 was $3,097,471 in Mexico and $21,453,158 in the U.S. The potential benefit of these NOL's has been recognized on the books of the Company, but it has been offset by valuation allowances.

Under provisions of pronouncements of the FASB, recognition of deferred tax assets is permitted unless it is more likely than not that the assets will not be realized. The Company has recorded noncurrent deferred tax assets as presented below. These valuation allowance increased during 2012 by $749,929 in the U.S., and by $164,793 in Mexico, the result of adding the potential benefit losses of the year ended May 31, 2012.

	U.S.			MEXICO
Deferred Tax Assets	$	7,294,074		$	929,241
Valuation Allowance		(7,294,074	)		(929,241	)
Balance Recognized	$	-		$	-

If not used, these carryforwards will expire during years ended May 31, as listed below:

	U.S.		MEXICO
2013	$		$	42,933
2014				67,322
2015				48,610
2016				60,203
2017				140,009
2018				457,312
2019				497,434
2020				500,548
2021				915,800
2022				367,300
2023		156,754
2024		245,805
2025		177,483
2026		219,811
2027		840,457
2028		4,195,302
2029		6,577,826
2030		4,353,164
2031		2,167,277
2032		2,519,279

A reconciliation of the taxes calculated using statutory rates to pretax losses with the provisions for income taxes is presented below.

	2012			2011
Taxes calculated using statutory rate	$	(966,745	)	$	(993,298	)
Tax effect of net operating losses		966,745			993,298
Provision for income taxes	$	-		$	-