NOTE 12 – INCOME TAXES

At December 31, 2011, the Company had deferred tax assets principally arising from net operating loss carry-forwards for income tax purposes. The Company calculates its deferred tax assets using the federal tax rate of 35% and the following state tax rates: Idaho (7.6%) and Utah (5%). Due to operating losses, the uncertainty of future profitability and limitations on the utilization of net operating loss carry-forwards under IRC Section 382, a valuation allowance has been recorded to fully offset the Company's deferred tax asset.

The actual Federal income tax provision differs from the amount computed by applying the Federal corporate income tax rate of 35% to income before taxes as follows:

	December 31, 2011			December 31, 2010			December 31, 2009
Expected federal tax benefit		(2,637,229	)	$	(1,668,700	)	$	(2,368,170	)
State and local taxes		(949,403	)		(600,732	)		(852,541	)
Non-deductible expenses		2,181,396			334,669			1,041,879
Change in valuation allowance		1,405,236			1,934,767			3,220,711
Income tax expense	$	-		$	-		$	-

The tax effect of temporary differences that give rise to the deferred tax assets at December 31, 2011 are as follows:

	December 31, 2011			December 31, 2010			December 31, 2009
Net Operating Loss Carryforwards	$	(12,544,019	)	$	(11,138,782	)	$	(9,204,020	)
Total gross deferred tax assets		12,544,019			11,138,782			9,204,020
Valuation allowance		(12,544,019	)		(11,138,782	)		(9,204,020	)
Net deferred tax assets	$	- 0 -		$	- 0 -		$	- 0 -

In assessing the realization of deferred tax assets, management determines whether it is more likely than not some, or all, of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers projected taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable losses and projected taxable losses over the periods that the deferred tax assets are deductible, management believes it is more likely than not that the Company will not realize the benefits of these deductible differences and thus recorded a valuation allowance against the entire deferred tax asset balance. As of December 31, 2011, 2010 and 2009, the valuation allowances were $12,544,019, $11,138,782 and $9,229,434, respectively. The change in valuation allowance between 2011 and 2010 was $1,405,236. The change in valuation allowance between 2010 and 2009 was $1,934,763.

At December 31, 2011, 2010 and 2009, the Company had net operating loss carry-forwards of approximately $29,399,200, $24,355,400 and $19,612,600 for federal income tax purposes, respectively. The net operating loss carry-forwards are available to be utilized against future taxable income through fiscal year 2031, subject to the Tax Reform Act of 1986, which imposed substantial restrictions on the utilization of net operating losses and tax credits in the event of an “ownership change” as defined by the Internal Revenue Code. Federal and state net operating losses are subject to limitations as a result of these restrictions. Under such circumstances, the Company's ability to utilize its net operating losses against future income may be reduced.