Income Taxes

12 Months Ended

Aug. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Note 6. Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets at August 31, 2016 and 2015 are as follows:

	Year Ended
	August 31,
	2016			2015
Deferred tax assets:
Net operating loss carryforwards	$	169,710		$	165,470
Capitalized research and development		2,577			4,157
Research and development credit carry forward		1,963			1,963
Total deferred tax assets		174,250			171,590
Less: valuation allowance		(174,250	)		(171,590	)
Net deferred tax asset	$	—		$	—

The net increase in the valuation allowance for deferred tax assets was $2,660 and $16,352 for the years ended August 31, 2016 and 2015. The Company evaluates its valuation allowance on an annual basis based on projected future operations. When circumstances change and this causes a change in management’s judgment about the realizability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current operations.

For federal income tax purposes, the Company has net U.S. operating loss carry forwards at August 31, 2016 available to offset future federal taxable income, if any, of $499,147, which will fully expire by the fiscal year ended August 31, 2035.  Accordingly, there is no current tax expense for the years ended August 31, 2016 and 2015. In addition, the Company has research and development tax credit carry forwards of $1,963 at August 31, 2016, which are available to offset federal income taxes and fully expire by August 31, 2028.

The utilization of the tax net operating loss carry forwards may be limited due to ownership changes that have occurred as a result of sales of common stock.

The effects of state income taxes were insignificant for the years ended August 31, 2016 and 2015.

The following is a reconciliation between expected income tax benefit and actual, using the applicable statutory income tax rate of 34% for the years ended August 31, 2016 and 2015:

	Year Ended
	August 31,
	2016			2015
Income tax benefit at statutory rate	$	2,660		$	16,352
Change in valuation allowance		(2,660	)		(16,352	)
	$	—		$	—

The fiscal years 2012 through 2016 remain open to examination by federal authorities and other jurisdictions in which the Company operates.

On December 22, 2017, the Tax Cuts and Jobs Act was enacted. This law substantially amended the Internal Revenue Code, including reducing the U.S. corporate tax rates. Upon enactment, the Company’s deferred tax asset and related valuation allowance decreased by $65,873 to $108,377. As the deferred tax asset is fully allowed for, this change in rates had no impact on the Company’s financial position or results of operations.