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EX-32.1 - EXHIBIT 32.1 - Location Based Technologies, Inc.ex32-1.htm
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v2.4.0.6
Note 11 - Provision for Income Taxes
3 Months Ended
Nov. 30, 2012
Income Tax Disclosure [Text Block]
11.           PROVISION FOR INCOME TAXES

Deferred income taxes are reported using the liability method. Deferred tax assets are recognized for deductible temporary differences and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences arise from the difference between the reported amounts of assets and liabilities and their tax basis. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and tax rates on the date of enactment.

The Company did not provide any current or deferred U.S. federal income taxes or benefits for any of the periods presented because the Company has experienced operating losses since inception. The Company provided a full valuation allowance on the net deferred tax asset, consisting of net operating loss carry forwards, because management has determined that it is more likely than not that we will not earn sufficient income to realize the deferred tax assets during the carry forward period.

The components of the Company’s deferred tax asset as of November 30, 2012 and August 31, 2012 are as follows:

   
November 30,
2012
   
August 31,
2012
 
Net operating loss carry forward and deductible temporary differences
  $ 15,360,000     $ 14,762,000  
Valuation allowance
    (15,360,000 )     (14,762,000 )
                 
Net deferred tax asset
  $ -     $ -  

A reconciliation of the combined federal and state statutory income taxes rate and the effective rate is as follows:  

   
November 30,
2012
   
August 31,
2012
 
Federal tax at statutory rate
    34.00 %     34.00 %
State income tax net of federal benefit
    5.83 %     5.83 %
Valuation allowance
    (39.83 %)     (39.83 %)
                 
      -       -  

The Company’s valuation allowance increased by $598,000 for the three months ended November 30, 2012.

As of November 30, 2012 and August 31, 2012, the Company had federal and state net operating loss carryforwards of approximately $38,563,000 and $37,063,000, respectively, which can be used to offset future federal income tax. The federal and state net operating loss carryforwards expire at various dates through 2032. Deferred tax assets resulting from the net operating losses are reduced by a valuation allowance, when, in the opinion of management, utilization is not reasonably assured. These carryforwards may be limited upon a change in ownership or consummation of a business combination under IRC Sections 381 and 382.

As of November 30, 2012 and August 31, 2012, no accrued interest and penalties are recorded relating to uncertain tax positions. Any such interest and penalties would be included in interest expense as a component of pre-tax net income or loss. The Company's tax filings are no longer open to examination by the Internal Revenue Service for tax years prior to 2008 and by state taxing authorities for tax years prior to 2007.