INCOME TAXES

3 Months Ended

Mar. 31, 2012

A reconciliation of the differences between the effective income tax rate and the statutory federal tax rate for the three months ended March 31, 2012 and 2011 are as follows:

	2012			2011

Tax benefit at U.S. statutory rate		34.00	%		34.00	%

State taxes, net of federal benefit		3.63			3.63

Change in valuation allowance		(37.63	)		(37.63	)
		-	%		-	%

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets at March 31, 2012 and December 31, 2011 consisted of the following:

Deferred Tax Assets	2012			2011

Net Operating Losses Carryforward	$	6,941,000		$	6,136,000
Depreciation		71,000			35,000
Bad debts		18,000			18,000
Net Non-current Deferred Tax Asset		7,030,000			6,189,000
Valuation Allowance		(7,030,000	)		(6,189,000	)
Total Net Deferred Tax Asset	$	—		$	—

As of March 31, 2012, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $18,683,000 that may be offset against future taxable income through 2032. Current tax laws limit the amount of losses available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax asset has been reported in the financial statements because the Company believes that there is a 50% or greater chance that short-term profitability will not be attained. Accordingly, the deferred tax assets have been offset by a valuation allowance of the same amount as of March 31, 2012 and December 31, 2011.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

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Reference 3: http://www.xbrl.org/2003/role/presentationRef

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+ Details

Latitude Solutions, Inc. 10-Q