NOTE 8 – INCOME TAXES

During both 2014 and 2013, the Company incurred a net loss and therefore had no tax liability. The Company does not have any material uncertain income tax positions. As a result of significant losses and uncertainty of future profit, the net deferred tax asset has been fully reserved.As of June 30, 2014, the valuation allowance decreased by $604 related to decreased federal and state NOL carry forwards. The cumulative net operating loss carryforward is approximately $47.7 million and $47.7 million at June 30, 2014 and 2013, respectively, and will start expiring in the year ended 2029. The Company has not performed a detailed analysis to determine whether an ownership change under Section 382 of the IRC has occurred. The effect of an ownership change would be the imposition of an annual limitation on the use of net operating loss (“NOL”) carryforwards attributable to periods before the change. Any limitation may result in expiration of a portion of the NOL before utilization.

The tax effects of temporary differences and tax loss carry forwards that give rise to significant portions of deferred tax assets at June 30, 2014 and 2013 are comprised of the following:

	As of June 30,
	2014		2013
Deferred tax asset
Net operating loss carryovers	$	21,698	$	22,427
Stock based compensation		125		-
Total deferred tax assets		21,823		22,427
Valuation Allowance		(21,823)		(22,427)
Deferred tax asset, net of allowance	$	-	$	-

The expected tax expense (benefit) based on the U.S. federal statutory rate is reconciled with actual tax expense (benefit) as follows:

	As of June 30,
	2014		2013
Statutory federal income tax rate	-34.0	%	-34.0	%
State taxes, net of federal tax benefit	-11.5	%	-11.5	%
Valuation Allowance	45.5	%	45.5	%
Income tax provision (benefit)	0.0	%	0.0	%

The income tax provision consists of the following:

	As of June 30,
	2014		2013
Federal
Current	$	-	$	-
Deferred		451		(350)
State
Current		-		-
Deferred		153		(118)
Change in valuation allowance		(604)		468
Income tax provision (benefit)	$	-	$	-