NOTE 9

INCOME TAXES

No provision was made for federal income taxes since the Company has significant net operating losses. At September 30, 2015, the Company had operating loss carryforwards of approximately $3,037,000. The net operating loss carry-forwards may be used to reduce taxable income through the year 2035. The principal difference between the net operating loss for book purposes and income tax purposes results from non-cash charges to operations related to stock options and warrants and common shares issued for services that are not currently deductible for income tax purposes. The availability of the Company’s net operating loss carry-forwards are subject to significant limitation since there was more than 50% change in the ownership of the Company’s stock.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax liabilities and assets as of September 30, 2015 and June 30, 2015, were as follows:

	September 30, 2015			June 30, 2015

Deferred tax assets:
Federal net operating loss	$	983,000		$	979,000
State net operating loss		146,000			145,000

Total deferred tax assets		1,129,000			1,124,000
Less: valuation allowance		(1,129,000	)		(1,124,000	)

	$	-		$	-

The Company has provided a 100% valuation allowance against the deferred tax assets at September 30 and June 30, 2015, to reduce such assets to zero, since there are significant limitations on the utilization of the Company’s net operating loss carry-forwards and there is no assurance that the Company will generate future taxable income to utilize such assets. Management reviews this valuation allowance requirement periodically and makes adjustments as warranted. The valuation allowance increased $5,000 for three months ended September 30, 2015 and $600,000 for the year ended June 30, 2015.