Income Taxes

12 Months Ended

Aug. 31, 2013

Notes

Income Taxes

Note 11  Income Taxes

Net deferred tax assets and liabilities consist of the following components:

	Years ended August 31,
	2013	2012
Deferred tax assets:
Pre-operating costs	$ 183,207	$ 197,576
Equity-based payments	71,872	71,872
Net operating loss carryforward	398,545	268,652
Valuation allowance	(653,624)	(538,100)
Net deferred tax assets	$ --	$ --

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 39% to pretax income from continuing operations for the years ended August 31, 2013 and 2012 as follows:

	Years Ended
	August 31,
	2013	2012
U.S. statutory rate	(34%)	(34%)
State income tax - net of federal benefit	(5%)	(5%)
Change in valuation allowance	39%	39%
Effective Rate	--	--

At August 31, 2013, the Company had approximately $475,000 of capitalized pre-operating costs that have not been deducted for tax purposes.  These costs are being amortized in the 180 month period beginning June 1, 2011, the commencement of exploration operations. No tax benefit has been reported in the August 31, 2013 and 2012 financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Based upon historical net losses and the Company being in the exploration stage, management believes that it is not more likely than not that the deferred tax assets will be realized and has provided a valuation allowance of 100% of the deferred tax asset.  The valuation allowance increased (decreased) by approximately $115,000 and $(1,388,000) in the years ended August 31, 2013 and 2012, respectively.