4. Income Taxes

6 Months Ended

Jan. 31, 2012

Income Tax Disclosure [Text Block]

4.  Income Taxes

The Company provides for income taxes asset and liability approach in accounting for income taxes. 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.

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:

	January 31, 2012			July 31, 2011
Income tax expense at statutory rate	$	(3,625,952	)	$	(3,597,082	)
Valuation allowance		3,625,952			3,597,082
Income tax expense per books	$	-		$	-

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

	January 31, 2012			July 31, 2011
Net Operating Loss Carryover	$	(8,119,225	)	$	(4,405,131	)
Valuation allowance		8,119,225			4,405,131
Net deferred tax asset	$	-		$	-

The Company has a net operating loss carryover of $20,818,525 as of January 31, 2012 which begins to expire in 2026. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.

The Company has net operating loss carryforwards that were derived solely from operating losses from prior years.  These amounts can be carried forward to offset future taxable income for a period of 20 years for each tax year’s loss.  No provision was made for federal income taxes as the Company has significant net operating losses.

At January 31, 2012 and July 31, 2011, the Company has established a valuation allowance equal to the deferred tax assets as there is no assurance that the Company will generate future taxable income to utilize these assets.

Due to the provisions of Internal Revenue Code Section 338, the Company may have no net operating loss carryforwards available to offset financial statement or tax return taxable income in future periods as a result of a change in control involving 50 percentage points or more of the issued and outstanding securities of the Company. The Company had no uncertain tax positions at January 31, 2012 and July 31, 2011.