Note 6 - Income Taxes

12 Months Ended

Aug. 26, 2012

Income Tax Disclosure [Text Block]

6.             INCOME TAXES

Income taxes consisted of the following:

	Years Ended
	August 26, 2012		August 28, 2011		August 29, 2010
Current:
Federal	$	-	$	-	$	15,289
State		23,224		19,457		15,676
		23,224		19,457		30,965
Deferred:
Federal		805,545		486,469		323,378
State		-		-		4,246
		805,545		486,469		327,624
Total	$	828,769	$	505,926	$	358,589

A reconciliation of the federal income tax provision at the statutory rate with actual taxes provided on earnings from continuing operations is as follows:

	Years Ended
	August 26, 2012			August 28, 2011			August 29, 2010
Ordinary federal income tax statutory rate		34.0	%		34.0	%		34.0	%
State income taxes net of federal tax effect		2.0			2.0			2.0
Effective rate		36.0	%		36.0	%		36.0	%

Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company's assets and liabilities.  Temporary differences and net operating loss carryforwards comprising the net deferred taxes on the balance sheet are as follows:

	August 26, 2012			August 28, 2011
Deferred Tax Assets
Accrued liabilities	$	81,093		$	86,764
Inventory valuation adjustments		33,669			54,026
Net operating loss carryforwards		849,709			767,705
Tax credit carryforwards		485,941			494,728
Stock option expense		195,361			174,551
Other		57,308			145,562
		1,703,081			1,723,336
Deferred Tax Liabilities
Tax depreciation and amortization greater than book		(2,532,490	)		(1,776,958	)
Net deferred taxes	$	(829,409	)	$	(53,622	)

Based on the long-term nature of its net operating loss carryforwards and the Company’s recent operating history and growth in fiscal 2012, management believes that it is more likely than not that the Company will be able to generate taxable income in the future sufficient to utilize these deductions and carryforwards, and accordingly no tax asset valuation allowance is deemed necessary.

As of August 26, 2012, the Company had federal net operating loss carryforwards of approximately $2.4 million expiring in 2021-2030.  Also as of August 26, 2012, the Company had $454,000 in federal alternative minimum tax (AMT) credit carryforward that has no expiration.  The AMT credits are available to offset future tax liabilities only to the extent that the Company has regular tax liabilities in excess of AMT tax liabilities.

The Company files a consolidated U.S. federal income tax return, as well as multiple state income tax returns.  The federal and state income tax returns for the fiscal years 2009 – 2011 remain subject to examination.