6. INCOME TAXES (Tables)

12 Months Ended

Aug. 31, 2012

Income Tax Disclosure [Abstract]

Components of the income tax provision

The components of the income tax provision for the years ended August 31, 2012 and 2011 were as follows:

	2012			2011
Current
Federal	$	(872,907	)	$	(623,006	)
State		(177,975	)		(148,171	)
		(1,050,882	)		(771,177	)
Deferred
Federal		114,712			(262,536	)
State		(22,901	)		(21,560	)
		91,811			(284,096	)
Total	$	(1,142,693	)	$	(1,055,273	)

Effective income tax rate

A reconciliation of the expected income tax (benefit) computed using the federal statutory income tax rate to the Company's effective income tax rate is as follows for the years ended August 31, 2012 and 2011:

	2012			2011
Income tax computed at federal statutory tax rate		34.0%			34.0%
State taxes, net of federal benefit		3.3			2.6
Meals & Entertainment		0.1			0.1
Other permanent differences		0.8			(1.0	)
Research and development credit		(8.4	)		(8.2	)
Change in prior year estimated taxes		(0.9	)		0.5
Total		28.9%			28.0%

Components of the Company deferred tax assets and liabilities

Significant components of the Company's deferred tax assets and liabilities for income taxes for the years ended August 31, 2012 and 2011 are as follows:

	2012			2011
Deferred tax assets
Accrued payroll and other expenses	$	79,922		$	91,489
Accrued warranty and service costs		–			18,732
Bad debt allowance		–			99,982
Deferred revenue		56,456			60,486
Property and equipment		32,916			60,626
Research and development credit		261,526			289,357
State taxes		66,902			50,378
Total deferred tax assets		497,722			671,050
Less:  Valuation allowance		–			–
		497,722			671,050
Deferred tax liabilities
State Tax Deferred		(30,663	)		(26,710	)
Capitalized computer software development costs		(1,062,204	)		(1,031,869	)
Total deferred tax liabilities		(1,092,867	)		(1,058,579	)
Net deferred tax liabilities	$	(595,145	)	$	(387,529	)