NOTE 8 — INCOME TAXES:

The (benefit from) provision for income taxes for the years ended December 31, 2017, 2016, and 2015 is comprised of the following:

	2017			2016		2015
Current
Federal	$	(97,339	)	$	-	$	-
State		9,034			-		10,726
Total current (benefit) provision		(88,305	)		-		10,726

Deferred
Federal		-			5,778,185		(1,171,865	)
State		-			22,633		896
Total deferred (benefit) provision		-			5,800,818		(1,170,969	)

Total (benefit) provision	$	(88,305	)	$	5,800,818	$	(1,160,243	)

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 34% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.

The Tax Act also puts in place new tax laws that will apply prospectively, which include, but are not limited to, (1) implementing a base erosion and anti-abuse tax, (2) generally eliminating U.S.federal income taxes on dividends from foreign subsidiaries, (3) a new provision designed to tax currently in the U.S. global intangible low-taxed income (“GILTI”) of foreign subsidiaries, which allows for the possibility of utilizing foreign tax credits to offset the income tax liability (subject to some limitations), and (4) a lower effective U.S. tax rate on certain revenues from sources outside the U.S.

The Company calculated its best estimate of the impact of the Act in accordance with its understanding of the Act and guidance available as of the date of this filing and recorded a $97,339 tax benefit in the period in which the legislation was enacted, related to a credit for alternative minimum taxes (AMT) paid in prior periods. A provisional amount related the remeasurement of certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future resulted in a charge of $3,906,774, which was fully offset by an equivalent adjustment to the deferred tax valuation allowance. No provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was deemed necessary.

On December 22, 2017, Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of US GAAP in situations when a registrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, the Company has determined that the $97,339 benefit recorded which relates to the AMT credit is a provisional amount and a reasonable estimate of December 31, 2017.

The Company had an ownership change as described in Internal Revenue Code Sec. 382 during 2004 (“2004 change”). As a result, the Company’s net operating losses prior to the 2004 change of $5,832,516 were subject to an annual limitation of $150,608 and for the first five (5) years are entitled to a BIG (Built-In-Gains) of $488,207 per year. These net operating losses expire in 2020 through 2024.

The Company had a second ownership change during 2006 (“2006 change”). The net operating losses incurred between the 2004 change and the 2006 change of $8,586,861 were subject to an annual limitation of $1,111,831 and for the first five (5) years are entitled to a BIG of $1,756,842 per year. These net operating losses expire in 2020 through 2026.

After applying the above limitations, at December 31, 2017, the Company has post-change net operating loss carry-forwards of approximately $26,660,530 which expire between 2018 and 2037. In addition the Company has research and development tax credit carryforwards of approximately $1,461,351 for the year ended December 31, 2017, which expire between 2025 and 2037.

As referenced in Note 2 - Acquisition, the Company acquired the stock of RVR Diagnostics Sdn Bhd, a Malaysia corporation, during the current year. RVR is on tax holiday through December 31, 2018. Accordingly, no taxes nor (benefit) have been provided on RVR results.

	2017			2016

Inventory reserves	$	244,158		$	253,380
Accrued expenses		102,332			53,140
Net operating loss carry-forwards		5,800,144			7,487,937
Research and development credit		1,918,137			1,461,351
Other credits		-			97,339
Other		167,522			292,556
Depreciation		91,258			31,285
Deferred tax assets		8,323,551			9,676,988

Intangibles		(341,042	)		-
Deferred tax liabilities		(341,042	)		-

Net deferred tax assets before valuation allowance		7,982,509			9,676,988
Less valuation allowances		(8,323,551	)		(9,676,988	)
Net noncurrent deferred tax liabilities	$	(341,042	)	$	-

The components of (loss) before income taxes consisted of the following:

	Year Ending December 31,
	2017			2016			2015
United States operations	$	(6,054,002	)	$	(7,546,229	)	$	(3,557,285	)
International operations		(406,063	)		-			-
(Loss) before taxes	$	(6,460,065	)	$	(7,546,229	)	$	(3,557,285	)

A reconciliation of the Federal statutory rate to the effective rate applicable to loss before income taxes is as follows:

	Year Ending December 31,
	2017			2016			2015
Federal income tax at statutory rates		(34.00	)%		(34.00	)%		(34.00	)%
State income taxes, net of federal benefit		0.09	%		0.21	%		0.23	%
Nondeductible expenses		1.04	%		0.57	%		1.38	%
Foreign rate differential		2.14	%		-			-
Change in valuation allowance		99.41	%		114.81	%		9.46	%
Impact of Tax Act on valuation allowance		(60.48	)%		-			-
AMT refund under Tax Act		(1.51	)%		-			-
Tax credits		(7.07	)%		0.00	%		(9.46	)%
Other		(0.99	)%		0.04	%		0.34	%
Income tax (benefit)		(1.37	)%		81.63	%		(32.05	)%

Interest and penalties, if any, related to income tax liabilities are included in income tax expense. As of December 31, 2017, the Company does not have a liability for uncertain tax positions.

The Company files Federal and state income tax returns. Tax years for fiscal 2014 through 2016 are open and potentially subject to examination by the federal and state taxing authorities.