INCOME TAXES

3 Months Ended

Nov. 30, 2011

Notes to Financial Statements

INCOME TAXES

For the period ended November 30, 2011, Xzeres has incurred net losses from continuing operations and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward has been fully reserved. The cumulative net operating loss carry-forward is approximately $11,267,000 at November 30, 2011, and will expire beginning in the year 2029. The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:

The provision for Federal income tax consists of the following:

	November 30, 2011			November 30, 2010
Federal income tax benefit attributable to:
Current operations	$	2,003,000		$	1,100,000
Less: valuation allowance		(2,003,000	)		(1,100,000	)
Net provision for Federal income taxes	$	0		$	0

The cumulative tax effect at the expected rate of 34% of significant items comprising our net deferred tax amount is as follows:

	November 30, 2011			February 28, 2011
Deferred tax asset attributable to:
Net operating loss carryover	$	3,831,000		$	1,195,000
Less: valuation allowance		(3,831,000	)		(1,195,000	)
Net deferred tax asset	$	0		$	0

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards of $11,267,000 for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur net operating loss carry forwards may be limited as to use in future years.