0001144204-13-061472.txt : 20131114 0001144204-13-061472.hdr.sgml : 20131114 20131114112511 ACCESSION NUMBER: 0001144204-13-061472 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20130831 FILED AS OF DATE: 20131114 DATE AS OF CHANGE: 20131114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROCHANNEL TECHNOLOGIES CORP CENTRAL INDEX KEY: 0001413488 STANDARD INDUSTRIAL CLASSIFICATION: BIOLOGICAL PRODUCTS (NO DIAGNOSTIC SUBSTANCES) [2836] IRS NUMBER: 980539775 STATE OF INCORPORATION: NV FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 333-146404 FILM NUMBER: 131217786 BUSINESS ADDRESS: STREET 1: 3905 NATIONAL DRIVE, SUITE 110 CITY: BURTONSVILLE STATE: MD ZIP: 20866 BUSINESS PHONE: 888-522-6422 MAIL ADDRESS: STREET 1: 3905 NATIONAL DRIVE, SUITE 110 CITY: BURTONSVILLE STATE: MD ZIP: 20866 10-K 1 v356806_10k.htm 10-K
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-K
 
(Mark One) 
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended August 31, 2013
 
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________ to ___________
 
Commission file number: 333-146404
 
MICROCHANNEL TECHNOLOGIES CORPORATION
(Exact name of registrant as specified in its charter)
 
Nevada
98-0539775
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 
 
10632 Little Patuxent Parkway, Suite 406
  
Columbia, MD
21044
(Address of principal executive offices)
(Zip Code)
 
(888) 522-6422
(Registrant’s telephone number, including area code)
 
Securities registered pursuant to Section 12(b) of the Act: None
 
Securities registered pursuant to Section 12(g) of the Act: None
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ¨     No x
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes  ¨     No x
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x  No ¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨     No T
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. T
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer o   Accelerated filer o
         
Non-accelerated filer (Do not check if a smaller reporting company) o   Smaller reporting company x
 
Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act.).
Yes T No o
 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter, based upon the closing sale price of the registrant’s common stock on February 28, 2013 was $256,725.
 
As of November 14, 2013, there were 53,864,600 shares of the registrant’s common stock outstanding.
 
DOCUMENTS INCORPORATED BY REFERENCE
None.
 
 
 
 
 
TABLE OF CONTENTS
 
MICROCHANNEL TECHNOLOGIES CORPORATION
ANNUAL REPORT ON FORM 10-K
 
FOR THE FISCAL YEAR ENDED AUGUST 31, 2013
 
 
 
PAGE
PART I
 
 
 
 
 
Item 1.
Business
3
 
 
 
Item 2.
Properties
4
 
 
 
Item 3.
Legal Proceedings
4
 
 
 
Item 4.
Mine Safety Disclosures
4
 
 
 
PART II
 
 
 
 
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
5
 
 
 
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
6
 
 
 
Item 8.
Financial Statements
8
 
 
 
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
17
 
 
 
Item 9A.
Controls and Procedures
17
 
 
 
Item 9B.
Other Information
17
 
 
 
PART III
 
 
 
 
 
Item 10.
Directors, Executive Officers, and Corporate Governance
18
 
 
 
Item 11.
Executive Compensation
20
 
 
 
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
21
 
 
 
Item 13.
Certain Relationships and Related Transactions, and Director Independence
23
 
 
 
Item 14.
Principal Accounting Fees and Services
23
 
 
 
PART IV
 
 
 
 
 
Item 15.
Exhibits, Financial Statement Schedules
25
 
 
 
SIGNATURES
26
 
 
 
EXHIBIT INDEX
27
 
 
CERTIFICATIONS
 
 
 
2

 
PART I
 
Forward-Looking Statements
 
Except for the historical information presented in this document, the matters discussed in this Form 10-K for the year ended August 31, 2013 contain forward-looking statements which involve assumptions and our future plans, strategies, and expectations. These statements are generally identified by the use of words such as “may,” “will,” “should,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project,” or the negative of these words or other variations on these words or comparable terminology. These statements are expressed in good faith and based upon a reasonable basis when made, but there can be no assurance that these expectations will be achieved or accomplished.
 
Such forward-looking statements include statements regarding, among other things, (a) our potential profitability and cash flows, (b) our growth strategies, (c) our future financing plans, and (d) our anticipated needs for working capital. This information may involve known and unknown risks, uncertainties, and other factors that may cause our actual results, performance, or achievements to be materially different from the future results, performance, or achievements expressed or implied by any forward-looking statements. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in this Form 10-K generally. Actual events or results may differ materially from those discussed in forward-looking statements as a result of various factors, including, without limitation, the matters described in this Form 10-K generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. In addition to the information expressly required to be included in this filing, we will provide such further material information, if any, as may be necessary to make the required statements, in light of the circumstances under which they are made, not misleading.
 
Although forward-looking statements in this report reflect the good faith judgment of our management, forward-looking statements are inherently subject to known and unknown risks, business, economic and other risks and uncertainties that may cause actual results to be materially different from those discussed in these forward-looking statements. Readers are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. We assume no obligation to update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, other than as may be required by applicable law or regulation. Readers are urged to carefully review and consider the various disclosures made by us in our reports filed with the Securities and Exchange Commission which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operation and cash flows. If one or more of these risks or uncertainties materialize, or if the underlying assumptions prove incorrect, our actual results may vary materially from those expected or projected.
 
Except where the context otherwise requires and for purposes of this Form 10-K only, “we,” “us,” “our,” “Company,” “our Company,” and “MicroChannel” refer to MicroChannel Technologies Corporation.
 
Item 1.  Business
 
Description of Business
 
MicroChannel Technologies Corporation (the “Company”) was formed as a wholly-owned subsidiary of New Energy Technologies, Inc. (“New Energy”).  New Energy spun off its issued and outstanding shares to New Energy’s shareholders on December 18, 2007.  We were incorporated under the name MultiChannel Technologies Corporation on February 28, 2005 in the State of Nevada, and changed to our existing name, MicroChannel Technologies Corporation, on April 4, 2005.
 
We are not currently engaged in any business operations. We are, however, in the process of attempting to identify, locate, and if warranted, acquire new commercial opportunities
 
 
3

 
Employees
 
As of August 31, 2013, we did not have any employees.
 
Item 2.  Properties
 
Our corporate office is located at 10632 Little Patuxent Parkway, Suite 406, Columbia, MD, 21044.  We are not currently charged rent to utilize this space.
 
Item 3.  LEGAL PROCEEDINGS
 
As of the date of this report, we are not a party to any material pending legal proceedings or government actions, including any bankruptcy, receivership, or similar proceedings. In addition, management is not aware of any known litigation or liabilities involving the operators of our properties that could affect our operations. Should any liabilities incur in the future, they will be accrued based on management’s best estimate of the potential loss. As such, there is no adverse effect on our financial position, results of operations or cash flow at this time. Furthermore, we do not believe that there are any proceedings to which any of our directors, officers, or affiliates, or any beneficial owner of record of more than five percent of our common stock, or any associate of any such director, officer, affiliate, or security holder is a party adverse or has a material interest adverse to us.
 
Item 4.  MINE SAFETY DISCLOSURES
 
Not Applicable.
   
 
4

 
PART II
 
ITEM 5.  MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
Market Information
 
Our common stock is quoted on the OTC Markets Group, Inc. OTCQBTM tier (the “OTCQB”) under the symbol “MCTC.”
 
The following table sets forth the high and low bid prices for our common stock for each quarter during the past two fiscal years as quoted on the OTCQB.  These prices reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:
 
 
 
High
 
Low
 
Fiscal Year Ended August 31, 2013
 
 
 
 
 
 
 
First Quarter 2013 (September 1 – November 30, 2012)
 
$
0.09
 
$
0.011
 
Second Quarter 2013 (December 1, 2012 – February 28, 2013)
 
$
0.005
 
$
0.001
 
Third Quarter 2013 (March 1 – May 31, 2013)
 
$
0.02
 
$
0.01
 
Fourth Quarter 2013 (June 1 – August 31, 2013)
 
$
0.015
 
$
0.01
 
 
 
 
 
 
 
 
 
Fiscal Year Ended August 31, 2012
 
 
 
 
 
 
 
First Quarter 2012 (September 1 – November 30, 2011)
 
$
0.15
 
$
0.01
 
Second Quarter 2012 (December 1, 2011 – February 29, 2012)
 
$
0.05
 
$
0.01
 
Third Quarter 2012 (March 1 – May 31, 2012)
 
$
0.15
 
$
0.01
 
Fourth Quarter 2012 (June 1 – August 31, 2012)
 
$
0.07
 
$
0.05
 
 
On November 1, 2013, the closing price of our common stock was $0.025 per share.
 
As of November 1, 2013, there were approximately 36 stockholders of record of our common stock.
 
Transfer Agent
 
Our transfer agent is Holladay Stock Transfer, Inc., having an office at 2939 N. 67 Place, Scottsdale, Arizona 85251.
 
Dividend Policy
 
We have not paid any dividends on our common stock and our board of directors presently intends to continue a policy of retaining earnings, if any, for use in our operations. The declaration and payment of dividends in the future, of which there can be no assurance, will be determined by the board of directors in light of conditions then existing, including earnings, financial condition, capital requirements and other factors. The Nevada Revised Statutes prohibit us from declaring dividends where, if after giving effect to the distribution of the dividend:
 
 
·
We would not be able to pay our debts as they become due in the usual course of business; or
 
·
Our total assets would be less than the sum of our total liabilities plus the amount that would be needed to satisfy the rights of stockholders who have preferential rights superior to those receiving the distribution.
 
Except as set forth above, there are no restrictions that currently materially limit our ability to pay dividends or which we reasonably believe are likely to limit materially the future payment of dividends on common stock.
 
Our Board of Directors has the right to authorize the issuance of preferred stock, without further stockholder approval, the holders of which may have preferences over the holders of the common stock as to payment of dividends.
 
 
5

 
Item 7.  Management's Discussion and Analysis of Financial condition and results of operations
 
Overview
 
The following discussion and analysis of our financial condition and results of operations (“MD&A”) should be read in conjunction with our financial statements and the accompanying notes to the financial statements included in this Form 10-K.
 
The MD&A is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and related disclosure of contingent assets and liabilities. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
 
Background
 
We were formed as a wholly-owned subsidiary of New Energy Technologies, Inc. New Energy spun off its issued and outstanding shares to New Energy’s shareholders on December 18, 2007.  We were incorporated under the name MultiChannel Technologies Corporation on February 28, 2005 in the State of Nevada, and changed to our existing name, MicroChannel Technologies Corporation, on April 4, 2005.
 
We are not currently engaged in any business operations. We are, however, in the process of attempting to identify, locate, and if warranted, acquire new commercial opportunities.
 
Results of Operations
 
Years Ended August 31, 2013 and 2012
 
Director and Officer Fees
 
Director and officer fees for the years ended August 31, 2013 and 2012, were $9,000 and $9,600, respectively.  The decrease of $600 is due to compensation provided to Mr. Gamache during the prior year for supplemental services that he rendered in addition to the executive consulting and director services he has historically provided.
 
Professional Fees
 
Professional fees for the years ended August 31, 2013 and 2012, were $31,860 and $43,334, respectively. The decrease of $11,474 is substantially due to a reduction of legal fees of $13,558 as a result of the curtailment in business activity while new commercial opportunities are identified, offset by a $3,006 increase in filing fees as a result of the requirement to file an XBRL detail tagged exhibit during the current year compared to an XBRL block tagged exhibit in the prior year.
 
Other Operating Expenses
 
Other operating expenses for the years ended August 31, 2013 and, 2012, were $2,581 and $846, respectively. The increase of $1,735 is due to the increase in state tax and business filing fees.
 
Liquidity and Capital Resources
 
As of August 31, 2013, we had an accumulated deficit of $541,537. At August 31, 2013, we had cash and cash equivalents of $21,135 compared to $66,612 at August 31, 2012. We had no outstanding debt at August 31, 2013.
 
 
6

 
Net cash used in operating activities was $45,477 for the year ended August 31, 2013, compared to net cash used in operating activities of $48,809 for the prior year. The decrease is substantially due to the reduction in the amount paid for legal fees while new commercial opportunities are identified.
 
Other Contractual Obligations
 
As of August 31, 2013, we do not have any contractual obligations.
 
Off-Balance Sheet Arrangements
 
We have no off-balance sheet arrangements.
 
Recently Issued and Adopted Accounting Pronouncements
 
We review new accounting standards as issued. Although some of these accounting standards issued or effective after the end of our previous fiscal year may be applicable to us, we have not identified any standards that we believe merit further discussion. We believe that none of the new standards will have a significant impact on our financial statements.
 
 
7

 
Item 8.  Financial Statements
 
INDEX TO FINANCIAL STATEMENTS
 
 
Page
 
 
Report of Independent Registered Public Accounting Firm
9
 
 
Balance Sheets as of August 31, 2013 and 2012
10
 
 
Statements of Operations for the Years Ended August 31, 2013 and 2012 and the Cumulative Period from Inception (February 28, 2005) to August 31, 2013
11
 
 
Statements of Stockholders’ Equity (Deficit) from Inception (February 28, 2005) to August 31, 2013
12
 
 
Statements of Cash Flows for the Years Ended August 31, 2013 and 2012 and the Cumulative Period from Inception (February 28, 2005) to August 31, 2013
13
 
 
Notes to Financial Statements
14
   
 
8

    
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors
MicroChannel Technologies Corporation
Columbia, Maryland
 
We have audited the accompanying balance sheets of MicroChannel Technologies Corporation ("the Company") (a development stage company) as of August 31, 2013 and 2012, and the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and for the cumulative period from February 28, 2005 (inception), to August 31, 2013.  These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audits.
 
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of MicroChannel Technologies Corporation as of August 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended, and for the cumulative period from February 28, 2005 (inception), to August 31, 2013, in conformity with accounting principles generally accepted in the United States.
 
The accompanying financial statements have been prepared assuming the Company will continue as a going concern.  As discussed in Note 2 to the financial statements, the Company has experienced recurring losses from operations since inception and has a substantial accumulated deficit.  These conditions raise substantial doubt about the Company's ability to continue as a going concern.  Management's plans regarding these matters are also described in Note 2.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
/S/ PETERSON SULLIVAN LLP
 
November 14, 2013
 
 
9

 
MICROCHANNEL TECHNOLOGIES CORPORATION
(A Development Stage Company)
 
BALANCE SHEETS
 
 
 
August 31,
 
August 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
ASSETS
 
 
 
 
 
 
 
Current assets
 
 
 
 
 
 
 
Cash and cash equivalents
 
$
21,135
 
$
66,612
 
Prepaid expenses
 
 
241
 
 
788
 
Total current assets
 
 
21,376
 
 
67,400
 
 
 
 
 
 
 
 
 
Total assets
 
$
21,376
 
$
67,400
 
 
 
 
 
 
 
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Current liabilities
 
 
 
 
 
 
 
Accounts payable
 
$
816
 
$
3,399
 
Total current liabilities
 
 
816
 
 
3,399
 
 
 
 
 
 
 
 
 
Stockholders' equity
 
 
 
 
 
 
 
Common stock: $0.0001 par value; 300,000,000 shares authorized, 53,864,600 issued and outstanding at August 31, 2013 and 2012
 
 
5,386
 
 
5,386
 
Additional paid-in capital
 
 
556,711
 
 
556,711
 
Deficit accumulated during the development stage
 
 
(541,537)
 
 
(498,096)
 
Total stockholders' equity
 
 
20,560
 
 
64,001
 
 
 
 
 
 
 
 
 
Total liabilities and stockholders' equity
 
$
21,376
 
$
67,400
 
 
(The accompanying notes are an integral part of these financial statements)
 
 
10

 
MICROCHANNEL TECHNOLOGIES CORPORATION
(A Development Stage Company)
 
STATEMENTS OF OPERATIONS
 
 
 
 
 
 
 
 
 
Cumulative
 
 
 
Year Ended
 
February 28, 2005
 
 
 
August 31,
 
(inception) to
 
 
 
2013
 
2012
 
August 31, 2013
 
Revenue
 
$
-
 
$
-
 
$
-
 
 
 
 
 
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
 
 
 
Option fee
 
 
-
 
 
-
 
 
2,000
 
Research and development
 
 
-
 
 
-
 
 
175,839
 
Director and officer fees
 
 
9,000
 
 
9,600
 
 
98,800
 
Professional fees
 
 
31,860
 
 
43,334
 
 
243,756
 
Other operating expenses
 
 
2,581
 
 
846
 
 
30,082
 
Total operating expenses
 
 
43,441
 
 
53,780
 
 
550,477
 
 
 
 
 
 
 
 
 
 
 
 
Loss from operations
 
 
(43,441)
 
 
(53,780)
 
 
(550,477)
 
 
 
 
 
 
 
 
 
 
 
 
Other income
 
 
 
 
 
 
 
 
 
 
Interest income
 
 
-
 
 
-
 
 
8,940
 
Total other income
 
 
-
 
 
-
 
 
8,940
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(43,441)
 
$
(53,780)
 
$
(541,537)
 
 
 
 
 
 
 
 
 
 
 
 
Net loss per common share: basic
 
$
(0.00)
 
$
(0.00)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding:
   basic
 
 
53,864,600
 
 
53,864,600
 
 
 
 
 
(The accompanying notes are an integral part of these financial statements)
 
 
11

 
MICROCHANNEL TECHNOLOGIES CORPORATION
(A Development Stage Company)
 
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
 
 
 
 
 
 
 
 
 
 
 
Deficit accumulated
 
 
 
 
 
 
Common Stock
 
Additional
 
during the
 
Total stockholders'
 
 
 
Shares
 
Amount
 
paid-in capital
 
development stage
 
equity (deficit)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock issued at $0.0001 per share
 
53,864,600
 
$
5,386
 
$
(5,286)
 
$
-
 
$
100
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(52,898)
 
 
(52,898)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2005
 
53,864,600
 
 
5,386
 
 
(5,286)
 
 
(52,898)
 
 
(52,798)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(82,739)
 
 
(82,739)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2006
 
53,864,600
 
 
5,386
 
 
(5,286)
 
 
(135,637)
 
 
(135,537)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Conversion of debt to equity on August 31, 2007
 
-
 
 
-
 
 
561,997
 
 
-
 
 
561,997
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(27,405)
 
 
(27,405)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2007
 
53,864,600
 
 
5,386
 
 
556,711
 
 
(163,042)
 
 
399,055
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(84,635)
 
 
(84,635)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2008
 
53,864,600
 
 
5,386
 
 
556,711
 
 
(247,677)
 
 
314,420
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(77,593)
 
 
(77,593)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2009
 
53,864,600
 
 
5,386
 
 
556,711
 
 
(325,270)
 
 
236,827
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(70,129)
 
 
(70,129)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2010
 
53,864,600
 
 
5,386
 
 
556,711
 
 
(395,399)
 
 
166,698
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(48,917)
 
 
(48,917)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2011
 
53,864,600
 
 
5,386
 
 
556,711
 
 
(444,316)
 
 
117,781
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(53,780)
 
 
(53,780)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2012
 
53,864,600
 
 
5,386
 
 
556,711
 
 
(498,096)
 
 
64,001
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss
 
-
 
 
-
 
 
-
 
 
(43,441)
 
 
(43,441)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, August 31, 2013
 
53,864,600
 
$
5,386
 
$
556,711
 
$
(541,537)
 
$
20,560
 
 
(The accompanying notes are an integral part of these financial statements)
 
 
12

 
MICROCHANNEL TECHNOLOGIES CORPORATION
(A Development Stage Company)
 
STATEMENTS OF CASH FLOWS
 
 
 
 
 
 
 
 
 
Cumulative
 
 
 
Year Ended
 
February 28, 2005
 
 
 
August 31,
 
(inception) to
 
 
 
2013
 
2012
 
August 31, 2013
 
Cash flows from operating activities
 
 
 
 
 
 
 
 
 
 
Net loss
 
$
(43,441)
 
$
(53,780)
 
$
(541,537)
 
Adjustments to reconcile net loss to net cash used in operating
   activities:
 
 
 
 
 
 
 
 
 
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
 
 
Decrease (increase) in prepaid expenses
 
 
547
 
 
3,146
 
 
(241)
 
Increase (decrease) in accounts payable
 
 
(2,583)
 
 
1,825
 
 
816
 
Net cash used in operating activities
 
 
(45,477)
 
 
(48,809)
 
 
(540,962)
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
 
 
 
 
 
 
Increase in payable - related party
 
 
-
 
 
-
 
 
561,997
 
Proceeds from the issuance of common stock
 
 
-
 
 
-
 
 
100
 
Net cash provided by financing activities
 
 
-
 
 
-
 
 
562,097
 
 
 
 
 
 
 
 
 
 
 
 
Increase (decrease) in cash and cash equivalents
 
 
(45,477)
 
 
(48,809)
 
 
21,135
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents at beginning of period
 
 
66,612
 
 
115,421
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents at end of period
 
$
21,135
 
$
66,612
 
$
21,135
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 
 
 
 
 
 
 
 
 
Interest paid in cash
 
$
-
 
$
-
 
$
-
 
Income taxes paid in cash
 
 
-
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
 
 
 
Supplemental disclosure of non-cash transaction:
 
 
 
 
 
 
 
 
 
 
Conversion of debt to equity
 
$
-
 
$
-
 
$
561,997
 
 
(The accompanying notes are an integral part of these financial statements)
 
 
13

 
MICROCHANNEL TECHNOLOGIES CORPORATION
(A Development Stage Company)
 
NOTES TO FINANCIAL STATEMENTS
 
August 31, 2013
 
Note 1. Organization and Description of Business
 
MicroChannel Technologies Corporation (the “Company”) was formed as a wholly-owned subsidiary of New Energy Technologies, Inc. (“New Energy”). New Energy spun off its issued and outstanding shares to New Energy’s shareholders on December 18, 2007. The Company was incorporated under the name MultiChannel Technologies Corporation on February 28, 2005 in the State of Nevada, and changed to its existing name on April 4, 2005.
 
The Company is not currently engaged in any business operations. It is, however, in the process of attempting to identify, locate, and if warranted, acquire new commercial opportunities.

Note 2. Going Concern Uncertainties
 
The Company is a development stage company, has not generated any revenues, has an accumulated deficit of $541,537 as of August 31, 2013, and does not have positive cash flows from operating activities. The Company expects to incur additional losses as it continues to identify and develop new commercial opportunities. The Company will be subject to the risks, uncertainties, and difficulties frequently encountered by early-stage companies. The Company may not be able to successfully address any or all of these risks and uncertainties. Failure to adequately do so could cause the Company’s business, results of operations, and financial condition to suffer. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.
 
The Company’s ability to continue as a going concern is an issue due to its net losses and negative cash flows from operations, and its need for additional financing to fund future operations. Management plans to identify commercial opportunities and to obtain necessary funding from outside sources. There can be no assurance that such funds, if available, can be obtained on terms reasonable to the Company. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern and do not include any adjustments that may result from the outcome of this uncertainty.

Note 3.  Summary of Significant Accounting Policies
 
Basis of Presentation
 
The accompanying financial statements have been prepared in accordance with U.S. GAAP.
 
Estimates
 
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses during the reporting period. On an on-going basis, the Company evaluates its estimates. Actual results and outcomes may differ materially from the estimates as additional information becomes known.
 
Cash and Cash Equivalents
 
Cash and cash equivalents includes highly liquid investments with original maturities of three months or less. On occasion, the Company has amounts deposited with financial institutions in excess of federally insured limits.
 
 
14

 
Fair Value of Financial Instruments
 
The Company measures certain financial assets and liabilities at fair value based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The carrying value of cash and cash equivalents and accounts payable approximate their fair value because of the short-term nature of these instruments and their liquidity. Management is of the opinion that the Company is not exposed to significant interest or credit risks arising from these financial instruments.
 
Income Taxes
 
Deferred income tax assets and liabilities are determined based on the estimated future tax effects of net operating loss and credit carryforwards and temporary differences between the tax basis of assets and liabilities and their respective financial reporting amounts measured at the current enacted tax rates. The Company records an estimated valuation allowance on its deferred income tax assets if it is not more likely than not that these deferred income tax assets will be realized.
 
The Company recognizes a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. As of August 31, 2013 and 2012, the Company has not recorded any unrecognized tax benefits. See Note 5. Income Taxes.
 
Segment Reporting
 
The Company’s business currently operates in one segment.
 
Net Loss per Share
 
The computation of basic net loss per common share is based on the weighted average number of shares that were outstanding during the year. The computation of diluted net loss per common share is based on the weighted average number of shares used in the basic net loss per share calculation plus the number of common shares that would be issued assuming the exercise of all potentially dilutive common shares outstanding using the treasury stock method. See Note 4. Net Loss Per Share.
 
Recently Issued Accounting Pronouncements
 
The Company reviews new accounting standards as issued. Although some of these accounting standards issued or effective after the end of the Company’s previous fiscal year may be applicable to the Company, it has not identified any standards that it believes merit further discussion. The Company does not expect the adoption of any recently issued accounting pronouncements to have a significant impact on its financial position, results of operations, or cash flows.

Note 4. Net Loss Per Share
 
During the years ended August 31, 2013 and 2012, the Company recorded a net loss. The Company does not have any stock options or warrants outstanding that would be anti-dilutive. Therefore, basic and diluted net loss per share is the same for those periods.

Note 5. 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, 2013 and 2012 are as follows:
 
 
15

 
 
 
Year Ended
 
 
 
August 31,
 
 
 
2013
 
2012
 
Deferred tax assets:
 
 
 
 
 
 
 
Net operating loss carryforwards
 
$
130,566
 
$
114,217
 
Capitalized research and development
 
 
7,317
 
 
8,896
 
Research and development credit carry forward
 
 
1,963
 
 
1,963
 
Total deferred tax assets
 
 
139,846
 
 
125,076
 
 
 
 
 
 
 
 
 
Less: valuation allowance
 
 
(139,846)
 
 
(125,076)
 
Net deferred tax asset
 
$
 
$
 
 
The net increase in the valuation allowance for deferred tax assets was $14,770 and $18,285 for the years ended August 31, 2013 and 2012. 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, 2013 available to offset future federal taxable income, if any, of $384,018, which will fully expire by the fiscal year ended August 31, 2033. Accordingly, there is no current tax expense for the years ended August 31, 2013 and 2012. In addition, the Company has research and development tax credit carry forwards of $1,963 at August 31, 2013, 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, 2013 and 2012.
 
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, 2013 and 2012:
 
 
 
Year Ended
 
 
 
August 31,
 
 
 
2013
 
2012
 
 
 
 
 
 
 
 
 
Income tax benefit at statutory rate
 
$
14,770
 
$
18,285
 
Change in valuation allowance
 
 
(14,770)
 
 
(18,285)
 
 
 
$
-
 
$
-
 
 
The fiscal years 2010 through 2013 remain open to examination by federal authorities and other jurisdictions in which the Company operates.
 
 
16

 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
 
None.
 
ITEM 9A. CONTROLS AND PROCEDURES
 
(a) Evaluation of Disclosure Controls and Procedures
 
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this annual report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of August 31, 2013, our disclosure controls and procedures were effective such that the information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
 
(b) Management’s Report on Internal Control over Financial Reporting
 
Our management is responsible for establishing and maintaining effective internal control over financial reporting, as such term is defined in Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on this evaluation, management concluded that our internal control over financial reporting was effective as of August 31, 2013.
 
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts non-accelerated filers (generally issuers with a public float under $75 million) from complying with Section 404(b) of the Sarbanes-Oxley Act of 2002.
 
(c) Changes in Internal Control over Financial Reporting
 
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
ITEM 9B. OTHER INFORMATION
 
None.
 
 
17

  
PART III
 
ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
DIRECTORS AND EXECUTIVE OFFICERS
 
The following table sets forth the names and ages of all of our directors and executive officers. We have a board of directors comprised of two members. Each director holds office until a successor is duly elected or appointed.  Executive officers serve at the discretion of the Board and are appointed by the Board. 
 
Also provided herein are brief descriptions of the business experience of each of the directors and officers during the past five years, and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities law. 
 
Name  
 
Age
 
Position With Company
 
Director Since  
 
 
 
 
 
 
 
David Gamache
 
63
 
Chief Executive Officer, Chief Financial Officer, President, Secretary, Treasurer, and Director
 
August 5, 2008  
 
 
 
 
 
 
 
Jeet S. Sidhu  
 
41
 
Director  
 
September 2, 2010  
 
David Gamache.  From August 2001 until present, Mr. Gamache has been the owner of Allen Lee Group.  Allen Lee Group does personal achievement coaching, business development consulting, and health coaching with various Network Marketing companies. From March 2007 to June 2008 Mr. Gamache was President, Treasurer, and Director of Lake Victoria Mining Company, Inc.  Lake Victoria Mining Company, Inc. is an exploration gold company doing business in Tanzania, Africa.  From September 2008 to present, Mr. Gamache has served and continues to serve as President, Treasurer, and Director of Duke Mountain Resources, Inc. Duke Mountain Resources, Inc. is a development stage innovative company that focuses on the exploration and development of precious metal deposits in British Columbia, Canada.  Mr. Gamache was invited to join the Board of Directors due to his experience with public companies in the matters relating to management, administration, and business development.
 
Jeet S. Sidhu.  Mr. Sidhu graduated from the British Columbia Institute of Technology with a Diploma in Corporate Finance in 1995. From 2002-2009, Mr. Sidhu was Vice-President of Montgomery Asset Management Corporation, a privately held firm providing financial and management consulting services to emerging growth corporations. Mr. Sidhu served as a member of the Board of Directors for U.S. Petroleum Corporation from August 2003 until August 2006. Mr. Sidhu served as a Director of Janus Resources, Inc. from September 8, 2008 to August 26, 2010 and as a Director of Ceres Ventures, Inc. from June 30, 2010 to August 15, 2012.  Mr. Sidhu was invited to join the Board of Directors due to his experience with public companies in the matters relating to management, administration, financial reporting, legal compliance, and business development.
 
Family Relationships and Other Matters
 
There are no family relationships among or between any of our officers and directors.
 
Legal Proceedings
 
During the past ten years none of our directors, persons nominated to become a director, or executive officers, have been involved in any legal proceedings as required to be disclosed pursuant to Item 401 of Regulation S-K.
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
 
Because we do not have a class of equity securities registered pursuant to section 12 of the Exchange Act we are not required to make the disclosures required by Item 405 of Regulation S-K.
 
 
18

 
CODE OF ETHICS
 
We have adopted a Code of Ethics that applies to all of our officers, directors and employees, including our Chief Financial Officer and Chief Executive Officer.  The Code of Ethics is designed to deter wrongdoing, and to promote, among other things, honest and ethical conduct, full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to the SEC, compliance with applicable governmental laws, rules and regulations, the prompt internal reporting of violations of the Code of Ethics, and accountability for adherence to the Code of Ethics. A copy of our Code of Ethics may be obtained at no charge by sending a written request to our Chief Executive Officer, David Gamache, 9192 Red Branch Road, Suite 110, Columbia, MD 21045.
 
CORPORATE GOVERNANCE
 
Director Independence
 
We are not listed on a major U.S. securities exchange and, therefore, are not subject to the corporate governance requirements of any such exchange, including those related to the independence of directors. However, at this time, after considering all of the relevant facts and circumstances, our Board of Directors has determined that Mr. Jeet Sidhu is independent from our management and qualifies as an “independent director” under the standards of independence of the FINRA listing standards.  We do not currently have a majority of independent directors as required by the FINRA listing standards. Upon our listing on any national securities exchange or any inter-dealer quotation system, we will elect such independent directors as is necessary under the rules of any such securities exchange.
 
Board Leadership Structure and Role in Risk Oversight
 
We have no fixed policy on whether the roles of Chairman of the Board and Chief Executive Officer should be separate or combined, with this decision being made based on our best interests considering the circumstances at the time. Currently, these roles are combined with Mr. David Gamache serving as both the Chairman of the Board and the Chief Executive Officer. We believe that combining these positions provides an effective leadership structure for our company, given the size of our Board.  As Chief Executive Officer, Mr. Gamache is intimately involved in our day-to-day operations and thus is in a position to elevate important business issues for consideration by the Board. The Board also believes that the combined role of Chief Executive Officer and Chairman of the Board promotes effective execution of strategic goals and facilitates information flow between management and the Board. Nevertheless, the Board intends to carefully evaluate from time to time whether our Chief Executive Officer and Chairman positions should be combined based on what the Board believes is best for us and our stockholders.
 
Management is responsible for the day-to-day management of risks the company faces, while the board, as a whole and through its committees, is responsible for the oversight of risk management. In its risk oversight role, the Board of Directors monitors whether the risk management processes that management has designed and implemented are effective both as designed and as executed.
 
Board of Directors Meetings, Committees of the Board of Directors, and Annual Meeting Attendance
 
During the fiscal year ended August 31, 2013, each director attended at least 75% of all meetings of the Board of Directors.  We do not maintain a policy regarding director attendance at annual meetings and we did not have an annual meeting during the fiscal year ended August 31, 2013.
 
We do not currently have any standing committees of the Board of Directors.  The full Board is responsible for performing the functions of:  (i) the Audit Committee, (ii) the Compensation Committee and (iii) the Nominating Committee. 

 

Audit Committee

 
The Board does not currently have a standing Audit Committee.  The full Board performs the principal functions of the Audit Committee.  The full Board monitors our financial reporting process and internal control system and reviews and appraises the audit efforts of our independent accountants.
 
 
19

  

Compensation Committee

 
The Board does not currently have a standing Compensation Committee.  The full Board establishes our overall compensation policies and reviews recommendations submitted by our management.
 

Nominating Committee

 
The Board does not currently have a standing Nominating Committee. We do not maintain a policy for considering nominees.  Our Bylaws provides that the number of Directors shall be fixed from time to time by the Board, but in no event shall be less than the minimum required by law.  The Board shall be large enough to maintain our required expertise but not too large to function efficiently.  Director nominees are recommended, reviewed and approved by the entire Board. The Board believes that this process is appropriate due to the relatively small number of directors on the Board and the opportunity to benefit from a variety of opinions and perspectives in determining director nominees by involving the full Board. 
 
While the Board is solely responsible for the selection and nomination of directors, the Board may consider nominees recommended by stockholders as it deems appropriate. The Board evaluates each potential nominee in the same manner regardless of the source of the potential nominee’s recommendation.  Although we do not have a policy regarding diversity, the Board does take into consideration the value of diversity among Board members in background, experience, education and perspective in considering potential nominees for recommendation to the Board for selection. Stockholders who wish to recommend a nominee should send nominations to our Chief Executive Officer, David Gamache, 9192 Red Branch Road, Suite 110, Columbia, MD  21045, that include all information relating to such person that is required to be disclosed in solicitations of proxies for the election of directors. The recommendation must be accompanied by a written consent of the individual to stand for election if nominated by the Board and to serve if elected.

 

Compensation Consultants

 
We have not historically relied upon the advice of compensation consultants in determining Named Executive Officer compensation. Instead, the full Board reviews compensation levels and makes adjustments based on their personal knowledge of competition in the market place, publicly available information and informal surveys of human resource professionals.
 
Stockholder Communications
 
Stockholders who wish to communicate with the Board of Directors may do so by addressing their correspondence to the Board of Directors at MicroChannel Technologies Corporation, Attention: David Gamache, 9192 Red Branch Road, Suite 110, Columbia, MD 21045.   The Board of Directors shall review and respond to all correspondence received, as appropriate.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
Summary Compensation
 
The following table and descriptive materials set forth information concerning compensation earned for services rendered to us by: the Chief Executive Officer (the “CEO”); the Chief Financial Officer (the “CFO”); and the two other most highly-compensated executive officers other than the CEO and CFO who were serving as executive officers during the fiscal year ended August 31, 2013 (the “Named Executive Officers”).
 
SUMMARY COMPENSATION TABLE
 
The following table summarizes the compensation earned by the Named Executive Officers during the fiscal years ended August 31, 2013 and 2012:
 
 
20

 
 
 
Year Ended
 
 
 
 
 
Name and Principal Position
 
August 31,
 
Salary ($)
 
Total ($)
 
David Gamache
 
 
 
 
 
 
 
Chief Executive Officer, Chief
 
2013
 
6,000
 
6,000
 
Financial Officer, Secretary,
 
 
 
 
 
 
 
Treasurer, and Director
 
2012
 
6,600
 
6,600
 
 
OUTSTANDING EQUITY AWARDS AT FISCAL-YEAR END
 
We do not have an employee stock option plan or other benefit plans.  Therefore, at August 31, 2013, there were no equity awards outstanding for the Named Executive Officers.
 
COMPENSATION OF DIRECTORS
 
We do not pay director compensation to directors who are also our employees.  Our Board of Directors determines the non-employee directors’ compensation for serving on the Board and its committees. In establishing director compensation, the Board is guided by the following goals:
 
 
·
Compensation should consist of a combination of cash and equity awards that are designed to fairly pay the directors for work required for a company of MicroChannel Technologies Corporation’s size and scope;
 
 
 
 
·
Compensation should align the directors’ interests with the long-term interests of stockholders; and
 
 
 
 
·
Compensation should assist with attracting and retaining qualified directors.
 
Non-employee directors receive $250 per month for their services as directors.  We also reimburse directors for any actual expenses incurred to attend meetings of the Board.
 
During both of the years ended August 31, 2013 and 2012, we paid $3,000 to Mr. Sidhu as compensation for services rendered as a non-employee director.
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
 
The following table sets forth certain information as of November 1, 2013 by (i) all persons who are known by us to beneficially own more than 5% of our outstanding shares of common stock, and (ii) by each director, director nominee, and Named Executive Officer and (iii) by all executive officers and directors as a group:
 
 
21

 
 
 
 
 
Amount and
 
 
 
 
 
 
 
Nature of
 
 
 
 
 
Positions and Offices
 
Beneficial
 
Percent
 
Name and Address of Beneficial Owner
 
Held
 
Ownership (1)
 
of Class(1)
 
 
 
 
 
 
 
 
 
Kalen Capital Corporation
 
 
 
 
 
 
 
700 – 688 West Hastings Street
 
Stockholder
 
7,000,000 (2)
 
13.0
%
Vancouver, BC V6B 1P1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
David Gamache
 
President, Chief
 
 
 
 
 
9192 Red Branch Road, Suite 110
 
Executive Officer, Chief
 
 
 
 
 
Columbia, MD 21045
 
Financial Officer,
 
-0-
 
-0-
%
 
 
Secretary, Treasurer, and
 
 
 
 
 
 
 
Director
 
 
 
 
 
 
 
 
 
 
 
 
 
Jeet Sidhu
 
 
 
 
 
 
 
9192 Red Branch Road, Suite 110
 
Director
 
6,749,600
 
12.5
%
Columbia, MD 21045
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Jatinder Bhogal
 
 
 
 
 
 
 
1962 Knox Road
 
Stockholder
 
23,000,000
 
42.7
%
Vancouver, BC V6T 1S6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
All Directors and Officers as a Group (2 persons)
 
 
 
6,749,600
 
12.5
%
 
(1)
Calculated pursuant to rule 13d-3(d) of the Exchange Act.  Beneficial ownership is calculated based on 53,864,600 shares of common stock issued and outstanding on a fully diluted basis as of November 1, 2013.  Unless otherwise stated below, each such person has sole voting and investment power with respect to all such shares.  Under Rule 13d-3(d) of the Exchange Act, shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days of November 1, 2013 are deemed outstanding for the purpose of calculating the number and percentage owned by such person, but are not deemed outstanding for the purpose of calculating the percentage owned by each other person listed.
 
 
(2)
Represents shares owned by Kalen Capital Corporation, a private Alberta corporation wholly owned by Mr. Harmel Rayat, a former officer, director and controlling stockholder.
 
Payments Upon Termination or Change in Control
 
There are no understandings or agreements known by management at this time which would result in a change in control. 
 
We do not have any change-of-control or severance agreements with any of our executive officers or directors.
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
As of August 31, 2013, we do not have an incentive stock option plan and have not granted any warrants or other rights to employees, directors or consultants.
 
 
22

 
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
 
We do not have a formal written policy for the review and approval of transactions with related parties. However, our Code of Ethics and Corporate Governance Principles require actual or potential conflict of interest to be reported to the Chairman of the Board. Our employees are expected to disclose personal interests that may conflict with ours and they may not engage in personal activities that conflict with their responsibilities and obligations to us. Periodically, we inquire as to whether or not any of our Directors have entered into any transactions, arrangements or relationships that constitute related party transactions.  If any actual or potential conflict of interest is reported, our entire Board of Directors and outside legal counsel review the transaction and relationship disclosed and the Board makes a formal determination regarding each Director's independence. If the transaction is deemed to present a conflict of interest, the Board of Directors will determine the appropriate action to be taken.
 
Transactions with Related Persons
 
Since the beginning of the fiscal year ended August 31, 2013, there have been no transactions in which we were or are a participant in which the amount involved exceeded $120,000 and in which any related person (as that term is defined for purposes of Section 404 (a) of Regulation S-K) had or will have a direct or indirect material interest and there are currently no such proposed transactions.
 
Review, Approval or Ratification of Transactions with Related Persons
 
Our policy with regard to transactions with related persons is that all material transactions are to be reviewed by the entire Board of Directors for any possible conflicts of interest.  In the event of a potential conflict of interest, the Board will generally evaluate the transaction in terms of the following standards: (i) the benefits to us; (ii) the impact on a director’s independence in the event the related person is a director, an immediate family member of a director or an entity in which a director is a partner, shareholder or executive officer; (iii) the availability of other sources for comparable products or services; (iv) the terms and conditions of the transaction; and (v) the terms available to unrelated parties or the employees generally.  The Board will then document its findings and conclusion in written minutes.
 
Director Independence
 
Please refer to “Director Independence” under the section titled “CORPORATE GOVERNANCE” in “ITEM 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE”.
 
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
 
INDEPENDENT PUBLIC ACCOUNTANTS
 
Peterson Sullivan, LLP (“Peterson Sullivan”) currently serves as our independent registered public accounting firm to audit our financial statements for the fiscal year ended August 31, 2013.  To the knowledge of management, neither such firm nor any of its members has any direct or material indirect financial interest in us or any connection with us in any capacity otherwise than as independent accountants.
 
Our Board of Directors, in its discretion, may direct the appointment of different public accountants at any time during the year, if the Board believes that a change would be in the best interests of the stockholders.  The Board of Directors has considered the audit fees, audit-related fees, tax fees and other fees paid to Peterson Sullivan, as disclosed below, and has determined that the payment of such fees is compatible with maintaining the independence of the accountants.
 
We do not currently have an audit committee.
 
 
23

    
PRINCIPAL ACCOUNTING FEES AND SERVICES
 
The following table presents aggregate fees for professional services rendered by Peterson Sullivan during the years ended August 31, 2013 and 2012.
 
 
 
Year Ended
 
 
 
August 31,
 
 
 
2013
 
2012
 
Audit fees
 
$
14,596
 
$
14,293
 
Tax fees
 
 
1,983
 
 
2,026
 
Total fees
 
$
16,579
 
$
16,319
 
 
Audit Fees
 
Audit fees for the years ended August 31, 2013 and 2012 consist of the aggregate fees billed by Peterson Sullivan for the audit of the financial statements included in our Annual Report on Form 10-K and review of interim financial statements included in the quarterly reports on Form 10-Q during the years ended August 31, 2013 and 2012.
 
Audit-Related Fees
 
There were no audit-related fees billed by Peterson Sullivan for the years ended August 31, 2013 and 2012. 
 
Tax Fees
 
Tax fees for the years ended August 31, 2013 and 2012 consist of the aggregate fees billed by Peterson Sullivan for professional services rendered for tax compliance, tax advice and tax planning.
 
All Other Fees
 
There were no other fees billed by Peterson Sullivan for the years ended August 31, 2013 and 2012.
 
 
24

 
PART IV
 
ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
 
(a) The following documents are filed as a part of this Form 10-K:
   
1.   Financial Statements
 
The following financial statements are included in Part II, Item 8 of this Form 10-K:
  
·      Report of Independent Registered Public Accounting Firm
·      Balance Sheets as of August 31, 2013 and 2012
·      Statements of Operations for the Years Ended August 31, 2013 and 2012 and the Cumulative Period from Inception (February 28, 2005) to August 31, 2013
·      Statements of Stockholders’ Equity (Deficit) from February 28, 2005 (Inception) to August 31, 2013
·      Statements of Cash Flows for the Years Ended August 31, 2013 and 2012 and the Cumulative Period from Inception (February 28, 2005) to August 31, 2013
·      Notes to Financial Statements
 
2.  Exhibits
 
The Exhibits listed in the Exhibit Index, which appears immediately following the signature page, are incorporated herein by reference, and are filed as part of this Form 10-K.
 
3.  Financial Statement Schedules
 
Financial statement schedules are omitted because they are not required or are not applicable, or the required information is provided in the financial statements or notes described in Item 15(a)(1) above.
 
 
25

 
SIGNATURES
 
Pursuant to the requirements of Sections 13 or 15 (d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
MicroChannel Technologies Corporation
 
                         (Registrant)
 
 
November 14, 2013
By
/s/ David Gamache
 
David Gamache
 
Chief Executive Officer and Chief Financial Officer
 
(Principal Executive Officer, Principal Financial Officer, and Principal Accounting Officer)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in capacities and on the dates indicated.
 
Signature
 
Title
 
Date
 
/s/ David Gamache
 
Chief Executive Officer, Chief
 
November 14, 2013
David Gamache
 
Financial Officer, Director
 
 
 
 
(Principal Executive Officer,
 
 
 
 
Principal Financial Officer, and
 
 
 
 
Principal Accounting Officer)
 
 
 
 
 
 
 
/s/ Jeet Sidhu
 
Director
 
November 14, 2013
Jeet Sidhu
  
 
  
 
 
 
26

 
Exhibit Index
 
Exhibit No.
 
Description of Exhibit
 
 
 
3.1
 
Articles of Incorporation, as amended. (1)
 
 
 
3.2
 
By Laws. (2)
 
 
 
10.1
 
Code of Ethics. *
 
 
 
31.1
 
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to Rule 13(a)-14 of the Securities Exchange Act of 1934, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
 
 
 
32.1
  
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 USC. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
 
___________________
 
*Filed herewith.
 
(1) 
Incorporated by reference to the exhibits filed as part of the report on Form 10-Q filed by MicroChannel Technologies Corporation on April 8, 2010.
 
 
(2) 
Incorporated by reference to the exhibits filed as part of the report on Form SB-2 filed by MicroChannel Technologies Corporation on October 1, 2007. 
 
 
27

 
EX-10.1 2 v356806_ex10-1.htm EXHIBIT 10.1
Code of Ethics
 
OVERVIEW
 
MicroChannel Technologies Corporation (“MicroChannel”) has adopted a Code of Ethics that applies to all Officers, Directors, and Employees of the company and its affiliates (herein collectively referred to as, “Employee” or “Employees”). 
 
In so doing, this Code of Ethics demands the highest standards of business conduct required of all Employees. 
 
The Code is part of MicroChannel’s ongoing effort to comply with applicable laws and have an effective program in place to prevent and detect violations of law; this code is an effort to train and educate MicroChannel Employees about ethical business practices.
 
OBJECTIVE
 
A key MicroChannel objective is to conduct business operations in the most ethical manner possible. MicroChannel cares about its Employees, shareholders, clients, suppliers and the communities in which it conducts business operations. During the course of meeting its business objectives, MicroChannel believes that it is essential for all Employees to understand and comply with the Code of Ethics and in so doing, participate in MicroChannel’s way of operating its business.
 
STANDARD OF CONDUCT
 
MicroChannel insists that all aspects of its business operations be conducted with honesty, integrity, fairness and with respect for those affected by its business activities. Similarly, MicroChannel expects the same in its relationships among those with whom it does business.
 
All Employees are expected to maintain and promote integrity and honesty in all business transactions. Employees must conduct themselves according to the highest ethical standards and are expected to apply ethical business practices in the administrative and financial affairs of MicroChannel business operations.
 
There is no Code of Ethics that can expect to define suitable behavior for each situation, nor should it seek to do so. As such, Employees are expected to exercise vigilance and make considered judgment of what is right and proper in any particular situation.
 
While carrying out the business operations of MicroChannel, Employees are expected to be accountable, truthful, trustworthy, conscientious, and committed to the highest standards of ethical business practices. As such, Employees are required to avoid all impropriety as well as the appearance of impropriety when conducting MicroChannel business operations.
 
ACCURACY AND COMPLETENESS OF ACCOUNTING RECORDS
 
MicroChannel’s accounting and supporting documents must accurately and completely describe and represent the nature and result of MicroChannel’s business operations. The results and activities of MicroChannel’s operations must be presented in a fair and unbiased manner.
 
 
 
MicroChannel business transactions must be appropriately authorized as well as completely and accurately recorded on the Company’s books. Proposed budgets, financial assessments, evaluations and fiscal presentations must fairly present all information relevant to the business transaction. Furthermore, at no time will the Company establish or maintain cash funds or asset accounts which are unrecorded.
 
Misappropriation, wrongful allocation, or improper use of the Company’s assets and property, or the false entry to records and reports by any Employee or by others must be reported to Board of MicroChannel.
 
ACCURATE AND TIMELY COMMUNICATION
 
MicroChannel expects Employees to be completely truthful and forthright in all internal and external interactions and communications, whether with shareholders, clients, government agencies, or others.
 
Employees will ensure that all statements are accurate and complete with no misrepresentations which may mislead or misinform. In all cases, Employees are expected to provide full, prompt and accurate disclosure to governmental agencies.
 
MAINTAINING AND RETAINING RECORDS
 
In order to maintain the security and integrity of MicroChannel’s record-keeping and reporting systems, all Employees must adhere to applicable records retention procedures and fully understand how to document and transact entries that fall within their jurisdiction.
 
All Employees are expected to comply fully with audits and provide timely response to requests for records or other materials from or on behalf of MicroChannel auditors or management.
 
COMPLYING WITH THE LAW
 
MicroChannel Employees are expected to fully comply with both the letter and the spirit of the laws and regulations of the countries in which the Company conducts business.
 
MicroChannel Employees are expected to act in accordance with the accepted business practices in commercial markets and adhere to the contractual terms and conditions applicable to any business transaction.
 
All Employees must commit to abiding by all applicable laws and regulations.
 
The breach of rules, regulations, ethical standards, and laws cannot be justified by the pursuit of profit or the departure from acceptable practice by competitors.
 
INSIDER TRADING
 
MicroChannel Employees are strictly prohibited by law from buying or selling the Company’s shares or any other public security as a result of inside information.
 
Furthermore, it is against the law and unethical to provide such information about MicroChannel to other individuals or companies so that they may gain.
 
 
 
In accordance with the Code of Ethics, Employees are strictly prohibited from trading in shares of MicroChannel, clients or suppliers as a result of any inside information.
 
ENVIRONMENTAL ISSUES
 
MicroChannel is committed to running its business in an environmentally sound and sustainable manner. MicroChannel’s objective is to ensure that its business operations have the minimum adverse environmental impact commensurate with the legitimate needs of its business operations.
 
DISCLOSURE OF PERSONAL INTEREST
 
MicroChannel Employees are expected to fully disclose any personal interest(s) which could impinge or might reasonably be considered by others to conflict with their business dealings with industry.
 
MicroChannel Employees must not engage in personal activities and financial interests that may conflict with their responsibilities and obligations to the Company or give assistance to competitors, in conflict with the interests of MicroChannel or its clients.
 
Under all circumstances, Employees must obtain the formal consent of MicroChannel management if they intend to become partners, shareholders, or Directors, or participants in companies outside the MicroChannel corporate structure.
 
PERSONAL DISCRETION AND CONFIDENTIALITY
 
At all times, Employees are expected to respect the confidentiality of information received during the course of business dealings and must never use such information for personal benefit or gain.
 
Employees are expected to give information during the course of business which is truthful, complete and fair and never intended to mislead.
Employees cannot disclose MicroChannel trade secrets, confidential or proprietary information, or any other such information without the written, formal authorization of management. Such information may not be disclosed as a means of making profit, gains or benefits.
 
At no time can Employees use Internet bulletin boards, chat rooms, messaging services, or other electronic systems to discuss issues, affairs, or opinions related to MicroChannel or any of its industries, or to respond to comments about the Company. MicroChannel considers electronic postings to be the same as “speaking to the media”.
 
FAIR COMPETITION
 
MicroChannel is committed to vigorous yet fair competition and supports the development of appropriate competition laws. Each Employee must avoid any business arrangement that might prevent the effective operation of fair competition.
 
COMPLIANCE WITH THE COMPANY’S CODE OF ETHICS
 
MicroChannel’s Board of Directors is responsible for ensuring that the standards outlined in the Code of Ethics are fully communicated to all Employees and are similarly understood and adhered to.
 
 
 
Should the Company experience loss of business as a result of adhering to the Code of Ethics, the Board of Directors will not criticize, condemn or complain.
 
Likewise, should a real or suspected breach of the Company’s Code of Ethics be brought to the attention of the Company, the Board of Directors will ensure that the reporting Employee does not suffer as a consequence of doing so.
 
The Company’s Code of Ethics are reflective of MicroChannel’s ethical standards and expectations. Accordingly, Employees are expected to fulfill the Company’s ethical commitments in a way that is clearly visible to all those with whom MicroChannel conducts its business.
 
At all times, Employees are expected to fully comply with the standards established in the Code of Ethics and ensure that their personal conduct is always above reproach.
 
MicroChannel expects each Employee to ensure that the conduct of others around him or her is in compliance with the Code of Ethics and that any breach of the same is duly reported to management.
 
All breaches of the law or violations of regulations and the standards of conduct listed in this Code of Ethics may lead to serious consequences for the Employee concerned; MicroChannel Employees have a legal, moral, and ethical duty to report any such real or suspected violation to the Board of Directors and regulatory authorities.
 
“CODE OF ETHICS” ENFORCEMENT
 
MicroChannel Employees understand and acknowledge that a breach of the Code of Ethics can result in severe disciplinary action, including but not necessarily limited to termination.
 
The Company’s Code of Ethics will be fairly enforced at all levels, without prejudice.
 
ANNUAL ACKNOWLEDGEMENT
 
Each Employee will be required to sign a statement annually that he or she has read and understands MicroChannel’s Code of Ethics. This statement will also require that the Employee state that he or she is in full compliance with the Code.
 
EMPLOYEE CERTIFICATION AND ACKNOWLEDGEMENT
 
I acknowledge and certify that I have read and understood the information set forth in the Code of Ethics of MicroChannel Technologies, Inc. and will comply with these principles in my daily work activities. I am not aware of any violation of the standards of MicroChannel’s Code of Ethics.
 
Date:
 
 
Name (print):
 
 
Position:
 
 
Address:
 
 
Signature:
 
 
 
 
 
EX-31.1 3 v356806_ex31-1.htm EXHIBIT 31.1
Exhibit 31.1
 
CERTIFICATION PURSUANT TO RULE 13A-14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, David Gamache, certify that:
 
1.
I have reviewed this annual report on Form 10-K of MicroChannel Technologies Corporation (the “registrant”);
 
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
 
4.
As the registrant’s certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared;
 
 
 
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
 
 
 
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
 
 
 
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
 
5.
As the registrant's certifying officer I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
 
 
 
 
(b) 
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
Date:  November 14, 2013
/s/ David Gamache
 
David Gamache
 
Chief Executive Officer and Chief Financial Officer
 
 
 
EX-32.1 4 v356806_ex32-1.htm EXHIBIT 32.1
Exhibit 32.1
 
CERTIFICATION PURSUANT TO 18 U.S.C. 1350
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
 
In connection with the Annual Report of MicroChannel Technologies Corporation (the “Company”) on Form 10-K for the fiscal year ended August 31, 2013, as filed with the Securities and Exchange Commission on November 14, 2013 (the “Report”), I, David Gamache, Chief Executive Officer and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date:  November 14, 2013
/s/ David Gamache
 
David Gamache
Chief Executive Officer and Chief Financial Officer
 
 
 
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FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="13%" colspan="2"> <div>2012</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>Deferred tax assets:</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 16px" width="63%"> <div>Net operating loss carryforwards</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>130,566</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>114,217</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 16px" width="63%"> <div>Capitalized research and development</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>7,317</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>8,896</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 16px" width="63%"> <div>Research and development credit carry forward</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>1,963</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>1,963</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 31px" width="63%"> <div>Total deferred tax assets</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>139,846</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>125,076</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>Less: valuation allowance</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>(139,846)</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>(125,076)</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 31px" width="63%"> <div>Net deferred tax asset</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>&#151;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>&#151;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> </table> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"></div> </div> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-ALIGN: center; FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px 0pt 27pt"> &#160;</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-ALIGN: justify; FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> The net increase in the valuation allowance for deferred tax assets was $<font style="FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt">14,770</font> and $<font style="FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt">18,285</font> for the years ended August 31, 2013 and 2012. <font style="COLOR: black">The Company evaluates its valuation allowance&#160;on an annual basis based on projected future operations. 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FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> The effects of state income taxes were insignificant for the years ended August 31, 2013 and 2012.</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> &#160;</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px" align="justify">The following is a reconciliation between expected income tax benefit and actual, using the applicable statutory income tax rate of <font style="FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> 34</font>% for the years ended August 31, 2013 and 2012:</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> &#160;</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;FONT-SIZE: 10pt; MARGIN: 0in 0in 0pt"> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt; WIDTH: 100%; TEXT-INDENT: 0in"> <table style="OVERFLOW: visible; BORDER-TOP: #9eb6ce 0px solid; BORDER-RIGHT: #9eb6ce 0px solid; BORDER-COLLAPSE: collapse; BORDER-BOTTOM: #9eb6ce 0px solid; MARGIN: 0in; BORDER-LEFT: #9eb6ce 0px solid; WIDTH: 80%" cellspacing="0" cellpadding="0" align="left"> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="33%" colspan="5"> <div>Year Ended</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="33%" colspan="5"> <div>August 31,</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="16%" colspan="2"> <div>2013</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="16%" colspan="2"> <div>2012</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="15%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="15%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>Income tax benefit at statutory rate</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="15%"> <div>14,770</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="15%"> <div>18,285</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>Change in valuation allowance</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="15%"> <div>(14,770)</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="15%"> <div>(18,285)</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="15%"> <div>-</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="15%"> <div>-</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> </table> </div> </div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-ALIGN: justify; FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> &#160;</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-ALIGN: justify; FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> The fiscal years 2010 through 2013 remain open to examination by federal authorities and other jurisdictions in which the Company operates.</div> </div> <table border="0" style="width:100%; table-layout:fixed;" cellspacing="0" cellpadding="0"><tr><td></td></tr></table> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif "> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-ALIGN: justify; FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> Significant components of the Company&#8217;s deferred tax assets at August 31, 2013 and 2012 are as follows:</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;TEXT-ALIGN: justify; FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> &#160;</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;FONT-SIZE: 10pt; MARGIN: 0in 0in 0pt"> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt; WIDTH: 100%; TEXT-INDENT: 0in"> <table style="OVERFLOW: visible; BORDER-TOP: #9eb6ce 0px solid; BORDER-RIGHT: #9eb6ce 0px solid; BORDER-COLLAPSE: collapse; BORDER-BOTTOM: #9eb6ce 0px solid; MARGIN: 0in 0in 0in 0.5in; BORDER-LEFT: #9eb6ce 0px solid; WIDTH: 92%" cellspacing="0" cellpadding="0" align="left"> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="27%" colspan="5"> <div>Year Ended</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="27%" colspan="5"> <div>August 31,</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; COLOR: #000000; FONT-STYLE: normal; TEXT-ALIGN: center" width="13%" colspan="2"> <div>2013</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="13%" colspan="2"> <div>2012</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>Deferred tax assets:</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 16px" width="63%"> <div>Net operating loss carryforwards</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>130,566</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>114,217</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 16px" width="63%"> <div>Capitalized research and development</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>7,317</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>8,896</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 16px" width="63%"> <div>Research and development credit carry forward</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>1,963</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>1,963</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 31px" width="63%"> <div>Total deferred tax assets</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>139,846</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>125,076</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="63%"> <div>Less: valuation allowance</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>(139,846)</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="12%"> <div>(125,076)</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left; PADDING-LEFT: 31px" width="63%"> <div>Net deferred tax asset</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>&#151;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 3px double; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="12%"> <div>&#151;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> </table> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"></div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt"></div> </div> </div> </div> <table border="0" style="width:100%; table-layout:fixed;" cellspacing="0" cellpadding="0"><tr><td></td></tr></table> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;MARGIN: 0pt 0px; FONT: 10pt Times New Roman, Times, Serif "> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px" align="justify">The following is a reconciliation between expected income tax benefit and actual, using the applicable statutory income tax rate of <font style="FONT-FAMILY: 'Times New Roman','serif'; FONT-SIZE: 10pt"> 34</font>% for the years ended August 31, 2013 and 2012:</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;FONT: 10pt Times New Roman, Times, Serif; MARGIN: 0pt 0px"> &#160;</div> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt;FONT-SIZE: 10pt; MARGIN: 0in 0in 0pt"> <div style="clear:both; FONT-FAMILY:Times New Roman;FONT-SIZE: 10pt; WIDTH: 100%; TEXT-INDENT: 0in"> <table style="OVERFLOW: visible; BORDER-TOP: #9eb6ce 0px solid; BORDER-RIGHT: #9eb6ce 0px solid; BORDER-COLLAPSE: collapse; BORDER-BOTTOM: #9eb6ce 0px solid; MARGIN: 0in; BORDER-LEFT: #9eb6ce 0px solid; WIDTH: 80%" cellspacing="0" cellpadding="0" align="left"> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="33%" colspan="5"> <div>Year Ended</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="33%" colspan="5"> <div>August 31,</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="16%" colspan="2"> <div>2013</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: center" width="16%" colspan="2"> <div>2012</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="15%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; BORDER-TOP: #000000 1px solid; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right" width="15%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>Income tax benefit at statutory rate</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="15%"> <div>14,770</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>$</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: right; PADDING-RIGHT: 5px" width="15%"> <div>18,285</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ccffcc; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> </tr> <tr style="HEIGHT: 12px"> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="45%"> <div>Change in valuation allowance</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: middle; BACKGROUND: #ffffff; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; VERTICAL-ALIGN: bottom; BACKGROUND: #ffffff; BORDER-BOTTOM: #000000 1px solid; FONT-WEIGHT: 400; FONT-STYLE: normal; TEXT-ALIGN: left" width="1%"> <div>&#160;</div> </td> <td style="FONT-SIZE: 10pt; FONT-FAMILY: Times New Roman; 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