10.

Income Taxes

The Company recognizes deferred tax assets and liabilities using the asset and liability method. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. This method requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

As of July 31, 2016, the Company’s deferred tax assets relate to net operating loss (“NOL”) carryforwards that were derived from operating losses from prior years as well as stock based compensation expense. A full valuation allowance has been applied to the Company’s deferred tax assets. The valuation allowance will be reduced when and if the Company determines it is more likely than not that the related deferred income tax assets will be realized.

The Company’s NOL carryforwards can be carried forward to offset future taxable income for a period of 20 years for each tax year’s loss. These NOL carryforwards begin to expire in 2026. No provision was made for federal income taxes as the Company has significant NOLs. All of the Company's income tax years remained open for examination by taxing authorities.

The provision for income taxes differs from the amounts which would be provided by applying the statutory federal income tax rate to the net loss before provision for income taxes for the following reasons:

	July 31, 2016		July 31, 2015

Net loss before taxes at statutory rate	$	(3,242,916)	$	(2,744,770)
Permanent items		1,764		6,508
Temporary items		4,770,850		667,840
Income tax expense at statutory rate		1,529,698		(2,070,422)

Valuation allowance		(1,529,698)		2,070,422

Income tax expense per books	$	-	$	-

Net deferred tax assets consist of the following components as of:

	July 31, 2016		July 31, 2015

Net operating loss carryover at statutory rate	$	(10,063,523)	$	(11,593,221)
Stock-based compensation expense		(9,217,868)		(4,447,018)
		(19,281,391)		(16,040,239)

Valuation allowance		19,281,391		16,040,239

Net deferred tax asset	$	-	$	-

The Company had no uncertain tax positions at July 31, 2016 or July 31, 2015.