INCOME TAXES

3 Months Ended

Sep. 30, 2011

Notes to Financial Statements

INCOME TAXES

For the nine months ended September 30, 2011, the Company incurred a net loss of approximately $1,674,000 and therefore has no tax liability. The Company began operations in 2007 and has previous net operating loss carry-forwards of $11,359,000 through December 31, 2010. The cumulative loss of $13,033,000 will be carried forward and can be used through the year 2031 to offset future taxable income. In the future, the cumulative net operating loss carry-forward for income tax purposes may differ from the cumulative financial statement loss due to timing differences between book and tax reporting.

The provision for Federal income tax consists of the following for the nine months ended September 30, 2011 and 2010:

	September 30, 2011			September 30, 2010
Federal income tax benefit attributable to:
Current operations	$	569,000		$	386,000
Valuation allowance		(569,000	)		(386,000	)
Net provision for federal income tax	$	0		$	0

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows as of September 30, 2011 and December 31, 2010:

	September 30, 2011			December 31, 2010
Deferred tax asset attributable to:
Net operating loss carryover	$	4,431,000		$	3,862,000
Valuation allowance		(4,431,000	)		(3,862,000	)
Net deferred tax asset	$	-0-		$	-0-

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of approximately $13,033,000 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.