Note 7 – Income Taxes

The Company uses the liability method, whereby deferred taxes and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During 2012 and 2011, the company incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $8,500,000 at December 31, 2012, and will expire in the years 2026 through 2032.

At December 31, 2012, deferred tax assets consisted of the following:

		2012
Deferred tax assets

Net operating loss carryforward	$	2,800,000

Valuation allowance		(2,800,000	)

Net deferred tax asset	$	---

The utilization of the carryforwards is dependent upon the Company's ability to generate sufficient taxable income during the carryforward period. In addition, utilization of these carryforwards may be limited due to ownership changes as defined in the Internal Revenue Code.