The Company accounts for income taxes pursuant to ASC 740. Under ASC 740 deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss carryforwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components as of May 31, 2017 and 2016:

	2017		2016
Deferred tax assets:
NOL carryover	$	7,245,451	$	7,219,239
Valuation allowance		(7,245,451)		(7,219,239)
Net deferred tax asset	$	-	$	-

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the period ended May 31, 2017 due to the following:


	2017		2016
Income tax benefit at statutory rate	$	(2,825,726)	$	(2,815,503)
Valuation allowance		2,825,726		2,815,503
	$	-	$	-

At May 31, 2017 and 2016, the Company had net operating loss carryforwards of approximately $7,245,451 and $7,219,239, respectively, which begin to expire in 2026. Deferred tax assets of approximately $2,825,726 and $2,815,503 in 2017 and 2016, respectively, created by the net operating losses have been offset by a 100% valuation allowance. The Company may be subjected to tax audit by the IRS for 2016 and 2017.