Income Taxes

12 Months Ended

Aug. 31, 2013

Notes to Financial Statements

NOTE 6 - INCOME TAXES

The components of the benefit (provision) for income taxes from continuing operations are as follows:

	For the		For the
	Year Ended		Year Ended
	August 31, 2013		August 31, 2012
Current (benefit) provision: federal	$	-	$	-
Current (benefit) provision: state		-		-
Total current provision		-		-
Deferred (benefit) provision: federal		-		-
Deferred (benefit) provision: state		-		-
Total deferred provision		-		-
Total provision (benefit) for income taxes
from continuing operations	$	-	$	-

Significant items making up the deferred tax assets and deferred tax liabilities are as follows:

	August 31, 2013			August 31, 2012
Long-term deferred taxes:
Operating loss carryforwards-federal	$	632,000		$	598,000
Operating loss carryforwards-state		131,000			124,000
Total deferred taxes		763,000			722,000
Less: valuation allowance		(763,000	)		(722,000	)
Net deferred tax assets	$	-		$	-

A valuation allowance is established if it is more likely than not that all or a portion of the deferred tax asset will not be realized. Accordingly, a valuation allowance was established in 2013 and 2012 for the full amount of the deferred tax asset due to the uncertainty of realization. Management believes that based upon its projection of future taxable operating income for the foreseeable future, it is more likely than not that the Company will not be able to realize the benefit of the deferred tax asset at August 31, 2013. The net change in the valuation allowance during the year ended August 31, 2013 was an increase of $41,000. The valuation allowance as of August 31, 2013 was $763,000.

The amounts and corresponding expiration dates of the Company’s unused net operating loss carryforwards are shown in the following table as of August 31, 2013:

Year	Federal		Georgia
2014	$	43,000	$	-
2015		389,000		89,000
2016		218,000		129,000
2017		187,000		207,000
2018		157,000		175,000
2024		321,000		340,000
2025		117,000		168,000
2026		72,000		165,000
2027		32,000		141,000
2028		86,000		134,000
2029		124,000		126,000
2030		139,000		139,000
2031		135,000		135,000
2032		115,000		115,000
2033		123,000		123,000
	$	2,258,000	$	2,186,000

The Company’s effective income tax (benefit) rate for continuing operations differs from the statutory federal income tax benefit rate as follows:

	For the			For the
	Year Ended			Year Ended
	August 31, 2013			August 31, 2012
Federal tax benefit (provision) rate		28	%		28	%
State tax benefit (provision) rate		4	%		4	%
Temporary differences		4	%		4	%
Permanent differences		0	%		0	%
Change in valuation allowance		-36	%		-36	%
Effective Income tax (benefit) provision rate
from continuing operations		0	%		0	%

In accordance with certain provisions of the Tax Reform Act of 1986 a change in ownership of greater than 50% percent of a corporation within a three-year period will place an annual limitation on the corporation’s ability to utilize its existing tax benefit carryforwards. Such a change in ownership may have occurred in connection with the private placement of securities. Additionally, the Company’s utilization of its tax benefit carryforwards may be restricted in the event of possible future changes in the ownership of the Company from the exercise of options or other future issuances of common stock.