10. Income Taxes
July 31, 2012, the Company has deferred tax assets as a
result of the net operating losses incurred from inception.
The resulting deferred tax assets are reduced by a valuation
allowance as discussed in Note 1, equal to the deferred tax
asset as it is unlikely, based on current circumstances, that
the Company will ever realize a tax benefit. Deferred tax
assets and the corresponding valuation allowances amounted to
approximately $1.8 million and $1.8 million at July 31, 2012
and July 31, 2011, respectively. The statutory tax rate is
35% and the effective tax rate is zero.
current tax laws, the cumulative operating losses incurred
amounting to approximately $6.7 million and $6.6 million at
July 31, 2012 and July 31, 2011, respectively, will begin to
expire in 2023.
382 of the U.S. Internal Revenue Code imposes an annual
limitation on loss carry-forwards to offset taxable income
when an ownership change occurs. The Company meets
the definition of an ownership change and some of the net
operating loss carry-forwards will be limited.