Annual report pursuant to section 13 and 15(d)

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 31, 2011
Income Taxes  
Income Taxes

 

NOTE 9 – INCOME TAXES

No provision for income taxes for the years ended December 31, 2011 and 2010 has been made.

Deferred tax assets reflect the net tax effects of net operating losses and tax credit carry forwards and temporary differences between the carrying amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows:

    2011   2010  
Net operating losses   $ 678,894   $ 449,935  
Common stock for services                           —     —  
Capital loss carryover     10,496     10,496  
Contributions     333     314  
      689,723     460,745  
               
Less: deferred tax liabilities     (1,772 )   (24,932 )
      687,951     435,813  
Valuation allowance     (687,951 )   (435,813 )
Net tax asset   $ —   $ —  

 

A reconciliation of income tax at the statutory rate to the Company’s effective rate is as follows:

  2011 2010
Computed tax at the expected statutory rate 15.00% 15.00%
State income tax – net of federal tax benefit 4.68% 4.68%
Income tax expense – effective rate 19.68% 19.68%

Realization of the deferred tax asset is dependent on future earnings, if any, the timing of which is uncertain. Accordingly, the Company’s net deferred tax asset has been fully offset by a valuation allowance.

The Company has the following net operating loss carryovers for income tax purposes:

Expiring 2026   $ 82,899  
Expiring 2027     131,828  
Expiring 2028     236,311  
Expiring 2029     1,202,060  
Expiring 2030     633,736  
Expiring 2031     855,223  
    $ 3,142,057  

For tax year 2008, the Company has applied for a change in accounting method with the Internal Revenue Service to report under the accrual method of accounting rather than report under the cash-basis method.

This change in accounting method will require the Company to recognize additional taxable income of $100,456. The Internal Revenue Service allows for this income to be recognized pro rata over four years. To that end, the Company recognized $-0- and $25,114 of additional income for the years ending December 31, 2011 and 2010, respectively.