NOTE 13 – INCOME TAXES

At December 31, 2012, the Company had deferred tax assets principally arising from net operating loss carry-forwards and stock based compensation for income tax purposes. The Company calculates its deferred tax assets using the federal tax rate of 35% and the following effective state rates, net of federal benefits: Idaho (0.4 %) and Utah (2.3 %). 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 tax effect of items that give rise to the deferred tax assets and liabilities at December 31, 2012 are as follows:


	December 31, 2012			December 31, 2011(a)
Deferred tax assets:
Net operating loss carryforward	$	15,221,763		$	12,107,606
Stock-based compensation		1,965,593			1,100,534
Reserves deductible in different periods		9,471			4,504
Total deferred tax assets		17,196,827			13,212,644

Deferred tax liabilities:
Fixed assets		(472,127	)		(391,721	)

Less: valuation allowance		(16,724,700	)		(12,820,923	)
	$	-		$	-

(a)

Restated

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, 2012 and 2011, the valuation allowances were $16,724,700 and $12,820,923, respectively. The valuation allowance increased by $3,903,777, $2,743,022 and $1,799,551 in the years ended December 31, 2012, and 2011, and 2010 respectively.

At December 31, 2012, the Company had net operating loss carry-forwards of approximately $40,860,000 for federal income tax purposes and $24,727,000 for state income tax purposes. The federal net operating loss carry-forwards are available to be utilized against future taxable income through fiscal year 2032 and state loss carry-forwards expire from 2024 through 2032, subject to 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. Utilization of the Company's federal and state net operating loss carry-forwards are subject to limitations as a result of these restrictions. The Company had no liability for uncertain tax positions as of December 31, 2012 and 2011. All tax years prior to 2009 are not subject to IRS and state tax authorities' audit.

A reconciliation of the differences between the effective and statutory income tax rates is as follows:

	December 31, 2012					December 31, 2011(a)					December 31, 2010(a)

Federal statutory rate	$	(3,406,340	)	35.0	%	$	(2,637,229	)	35.0	%	$	(1,668,694	)	35.0	%
State income taxes – Idaho		(37,982	)	0.4	%		(29,406	)	0.4	%		(18,606	)	0.4	%
State income taxes – Utah		(227,169	)	2.3	%		(175,877	)	2.3	%		(111,285	)	2.3	%
Change in valuation allowance		3,903,777		(40.1	%)		2,743,022		(36.4	%)		1,799,551		(37.7	%)
Non-deductible expenses		(232,287	)	2.4	%		(84,110	)	1.1	%		(42,053	)	0.9	%
Miscellaneous		-					183,600		(2.4	%)		41,087		(0.9	%)
		-		0	%				0	%		-		0	%

(a)

Restated