NOTE 12 - INCOME TAXES

12 Months Ended

Aug. 31, 2018

NOTE 12 – INCOME TAXES

For the years ended August 31, 2018, and 2017, the benefit for income taxes differed from the amounts computed by applying the statutory federal income tax rate at which rate the tax benefits is expected to occur. The reconciliation is as follows:

	Years Ended August 31
	2018			2017
Benefit computed at statutory rate	$	96,000		$	157,000
State tax (benefit), net of federal affect		20,000			31,000
Permanent differences (primarily change in fair value of derivative liability)		(4,000	)		(188,000	)
Increase in valuation allowance		(112,000	)		-
Net income tax benefit	$	-		$	-

The Company has net operating loss carry-forward for income tax totaling purposes approximately $4.4 million at August 31, 2018 which expire at various times through 2038. A significant portion of these carry-forwards is subject to annual limitations due to “equity structure shifts” or “owner shifts” involving “five percent shareholders” (as defined in the Internal Revenue Code) which results in a more than fifty percent change in ownership.

The net deferral tax asset is as follows:

	Years Ended August 31
	2018			2017
Net operating loss carry-forward	$	1,107,000		$	1,043,000
Accrued compensation		271,000			130,000
Valuation allowance		(1,378,000	)		(1,173,000	)
Net deferred tax asset	$	-		$	-

The valuation allowance increased by $205,000 during fiscal year 2018.