| Income Taxes | Note 6. Income Taxes Deferred income taxes reflect the net
tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets at August 31, 2015
and 2014 are as follows:
Year Ended
August 31,
2015 2014
Deferred tax assets:
Net operating loss carryforwards $ 165,470 $ 147,538
Capitalized research and development 4,157 5,737
Research and development credit carry forward 1,963 1,963
Total deferred tax assets 171,590 155,238
Less: valuation allowance (171,590 ) (155,238 )
Net deferred tax asset $ — $ — The net increase in the valuation allowance
for deferred tax assets was $16,352 and $15,392 for the years ended August 31, 2015 and 2014. 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, 2015 available to offset future federal taxable income, if any,
of $486,676, which will fully expire by the fiscal year ended August 31, 2035. Accordingly, there is no current tax expense
for the years ended August 31, 2015 and 2014. In addition, the Company has research and development tax credit carry forwards of
$1,963 at August 31, 2015, 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, 2015 and 2014. 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, 2015
and 2014:
Year Ended
August 31,
2015 2014
Income tax benefit at statutory rate $ 16,352 $ 15,392
Change in valuation allowance (16,352 ) (15,392 )
$ — $ — The fiscal years 2012 through 2015 remain open to examination
by federal authorities and other jurisdictions in which the Company operates. On December 22, 2017, the Tax Cuts and
Jobs Act was enacted. This law substantially amended the Internal Revenue Code, including reducing the U.S. corporate tax rates.
Upon enactment, the Company’s deferred tax asset and related valuation allowance decreased by $64,857 to $106,733. As the
deferred tax asset is fully allowed for, this change in rates had no impact on the Company’s financial position or results
of operations. |
