NOTE 7 - INCOME TAXES

At December 31, 2013, the Company has approximately $1,856,000 of net operating loss carry-forwards which expire between 2030 and 2033. The net operating loss carry-forwards may be subject to certain restrictions in the future, particularly in the event of a change in ownership under Internal Revenue Code Section 382.

Deferred tax assets and liabilities are recorded based on the difference between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes, as measured by the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are carried on the balance sheet with the presumption that they will be realizable in future periods when pre-tax income is generated. A valuation allowance is required to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The net operating loss carry-forwards may be subject to certain restrictions in the future, particularly in the event of a change in ownership under Internal Revenue Code Section 382.

Deferred tax assets and liabilities represent the future impact of temporary differences between the financial statement and tax bases of assets and liabilities. The Company's net deferred tax assets have been fully reserved, effectively by a valuation allowance, because management does not believe realization of the deferred tax assets is sufficiently assured at the balance sheet date.

The deferred tax assets (liabilities) and associated valuation allowance at December 31, 2013 and 2012, are as follows:

	2013			2012
Current assets:
Stock based compensation	$	156,993		$	22,337
		156,993			22,337
Non-current assets:
Net operating loss carryforwards		778,782			685,774
		935,775			708,111
Valuation allowance		(935,775	)		(708,111	)
Net deferred tax assets	$	-		$	-

No income tax benefit was recognized for the years ended December 31, 2013 and 2012, as indicated below:

	2013			2012
Deferred tax benefit:
Federal	$	209,205		$	581,082
State		18,459			50,529
		227,664			631,611
Increase in valuation allowance		(227,664	)		(631,611	)
	$	-		$	-

A reconciliation of income tax computed at the U.S. statutory tax rate of 34% to the effective income tax rate is as follows:

	2013			2012
Statutory rate		34	%		34	%
State taxes		3			3
Permanent differences and other		(10	)		(12	)
Valuation allowance		(27	)		(25	)
Effective rate		-			-