INCOME TAXES

12 Months Ended

Aug. 31, 2012

Notes to Financial Statements

Note 10- INCOME TAXES

The Company followed the provisions of ASC 740, “Income Taxes” (“ASC 740”).  As a result of the implementation of ASC 740, the Company recognized no adjustment in the net liability for unrecognized income tax benefits.  The Company believes there are no potential uncertain tax positions and all tax returns are correct as filed.  Should the Company recognize a liability for uncertain tax positions; the Company will separately recognize the liability for uncertain tax positions on its balance sheet.  Included in any liability for uncertain tax positions, the Company will also record a liability for interest and penalties.  The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of the current provision for income taxes.

Substantial changes in the Company’s ownership have occurred, and therefore there is an annual limitation of the amount of Parent’s pre-acquisition net operating loss carryforward which can be utilized.  Accordingly, only the post-acquisition net operating loss carryforward has been included for Parent.

The reconciliation of the provision (benefit) for income taxes computed at the U.S. federal statutory rate to the Company’s effective tax rate for the years ended August 31, 2012 and 2011 is as follows:

	2012			2011
Federal benefit at Statutory rate	$	574,000		$	181,000
State income tax, net of federal benefit		34,000			11,000
Unused net operating losses		(608,000	)		(192,000	)
Provision (Benefit) for income taxes	$	-		$	-

The Company has not made provision for income taxes in the year ended August 31, 2012 and 2011, respectively, since the Company has the benefit of net operating losses carried forward in these periods.