NOTE 7. INCOME TAXES

For the years ended June 30, 2017 and 2016, our net losses were $835,039 and $1,184,889, respectively, and no provision for income taxes was recorded. We made no provision for income taxes due to our utilization of federal net operating loss carry forwards to offset both regular taxable income and alternative minimum taxable income.

Income taxes differ from the amount that would be computed by applying the Federal statutory income tax rates of 34% as follows:

Deferred tax assets and liabilities consist of the following as of June 30:

The Company has provided a valuation allowance on the deferred tax assets at June 30, 2017 and 2016 to reduce such asset to zero, since there is no assurance that the Company will generate future taxable income to utilize such asset. Management will review this valuation allowance requirement periodically and make adjustments as warranted. The net change in the valuation allowance for the year ended June 30, 2017 was an increase of $272,299.

The Company has net operating loss carryforwards of approximately $2.2 million for federal purposes available to offset future taxable income that expire in varying amounts through 2036. The ability to utilize the net operating loss carry forwards could be limited by Section 382 of the Internal Revenue Code which limits their use if there is a change in control (generally a greater than 50% change in ownership). The Company is subject to examination by tax authorities for all years for which a loss carry forward is utilized in subsequent periods.

The Company follows FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of June 30, 2017 and 2016, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption. The tax years 2011 through 2016 remain open to examination by the major taxing jurisdictions in which the Company operate

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of June 30, 2017 and 2016, the Company has no accrued interest or penalties related to uncertain tax positions.