Income Taxes

3 Months Ended

Sep. 30, 2011

Note 4 - Income Taxes

The Company accounts for income taxes under the asset and liability method as stipulated by Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes,” which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes are recognized for all significant temporary difference between tax and financial statements bases of assets and liabilities. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

As a result of the Company incurring net losses, an income tax benefit in the form of net operating loss carry-forwards have been generated for the nine months ended September 30, 2011 and the prior years ended December 31, 2010.

The potential future benefit from income taxes arising from operations for the nine month period ending September 30, 2011 and 2010 consist of the following:

	Nine Months Ended September 30
	2011			2010
Current:
Federal	$	0		$	0
State		0			0
Deferred
Federal		295,626			29,888
State		0			0
		295,626			29,888

Increase in Valuation allowance		(295,626	)		(29,888	)
Income Tax Benefit	$	0		$	0

The effective tax rates differ from the statutory rates for 2011 and 2010 and prior primarily due to the following:

	As of September 30, 2011						As of September 30, 2010
	Amount			Effective Tax Rate			Amount			Effective Tax Rate
Federal income tax liability (benefit)	$	(295,626	)		-34	%	$	(29,888	)		-34	%
State income tax liability (benefit)
Permanent Difference		0			0	%		0			0	%
Change in Valuation Allowance		295,626			34	%		29,888			34	%
	$	0			0	%	$	0			0	%

Permanent differences consist primarily of disallowed travel, meal and entertainment expenses.

The Company’s net deferred tax assets consist primarily of net operating loss carry-forwards. At September 30, 2011, the Company had federal net operating loss carry-forwards totaling approximately $1,060,000, which may be used to offset future taxable income. These net operating loss carry-forwards expire over various years through 2025. The net operating loss carryforwards may be limited under the Change of Control provisions of the Internal Revenue Code section 382. As of September 30, 2011 and December 31, 2010, the Company has determined that due to the uncertainty regarding its future profitability, a full valuation allowance is required for deferred tax assets. Net deferred tax assets and liabilities are comprised of the following as of September 30, 2011 and December 31, 2010:

	As of September 30, 2011			As of December 31, 2010
Deferred Tax Assets
Current	$	0		$	0
Non-current		361,123			65,496
Less Valuation Allowance		(361,123	)		(65,496	)
Net deferred tax asset	$	0		$	0

The federal and states of Florida and Alabama are the significant tax jurisdictions where the Company files income, franchise and gross receipts tax returns as required. There are currently no on-going examinations of tax returns by federal and state tax authorities.

Note 5- Notes Payable

The Company has a 12% Convertible Note for $150,000 due July 31, 2012, issued on July 8, 2011. Interest accrues beginning July 31, 2011 and interest payments are due October 1, 2011, January 1, 2012, and the conversion date or due date. The Holder of the note may exercise an option to convert after the closing date of a “Qualified Financing” at 80% of the gross purchase price paid by investors in the “Qualified Financing”. The holder also received a “Common Stock Purchase Warrant”, dated July 31, 2012, giving the holder a five year period from the issue date to purchase up to 150,000 shares of common stock at $1.00 per share, adjusted to reflect any stock split, stock dividend, or combination of shares after the issue date. The holder was entitled to purchase up to 150,000 shares pursuant to the Common Stock Purchase Warrant as of September 30, 2011. As of September 30, 2011, there has been no conversion or shares purchased under the Common Stock Purchase Warrant, and the Company has accrued $3,000 of interest expense with respect to the Note.

- 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

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 2

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 136, 172

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 43, 44, 45, 46, 47, 48, 49

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 4: http://www.xbrl.org/2003/role/presentationRef

-Publisher SEC

-Name Regulation S-X (SX)

-Number 210

-Section 08

-Paragraph h

-Article 4

Reference 5: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 3

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319

Reference 6: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 9

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319

Reference 7: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 15

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

Reference 8: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 235

-SubTopic 10

-Section S99

-Paragraph 1

-Subparagraph (SX 210.4-08.(h))

-URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690

+ Details

Arcis Resources Corp 10-Q