2. INCOME TAXES

The Company recognizes deferred income tax liabilities and assets for the expected future tax consequences of events that have been recognized in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the differences between the financial statement carrying amounts and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.

The Company recorded no income taxes for the quarter ended September 30, 2013 and 2012 due to the use of available net operating loss carryforwards.

Net operating loss carry forwards of approximately $696,840 at September 30, 2013 are available to offset future taxable income, if any, and expire in 2027. This results in a net deferred tax asset, assuming an effective tax rate of 34% of approximately $234,520 at September 30, 2013. A valuation allowance in the same amount has been provided to reduce the deferred tax asset, as realization of the asset is not assured.