Note 10 - Income Taxes

12 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

10.

INCOME TAXES

A reconciliation of the provision (recovery) of income taxes to the statutory federal income tax rate is as follows:

	2016			2015			2014
Income (Loss) Before Provision for (Recovery of) Income Taxes	$	1,333,248		$	(122,377	)	$	8,376
Statutory rate		34	%		34	%		34	%
		453,304			(41,608	)		2,848
Permanent differences		1,000			900			1,200
Research and development and other credits - net		(47,400	)		(48,500	)		(46,300	)
Valuation allowance		(3,681,100	)		82,200			44,400
Other		(25,404	)		7,008			(2,148	)
Total recovery of income taxes	$	(3,299,600	)	$	-		$	-

Deferred tax assets (liabilities) consist of the following:

	2016			2015
Inventories	$	302,600		$	81,500
Bad debts		3,400			3,400
Accrued liabilities		77,700			70,600
Prepaid expense		(8,900	)		(13,400	)
Depreciation and amortization		93,000			46,700
Research and development and other credit carryforwards		2,019,700			1,980,200
Net operating loss carryforward		1,303,000			1,914,300
Directors stock option plan		40,100			40,100
Acquisition costs		-			125,500
		3,830,600			4,248,900
Valuation allowance		(500,000	)		(4,248,900	)
Total	$	3,330,600		$	-

The Company did not incur any material impact to its financial condition or results of operations due to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

Valuation Reserve

The decrease in the current year valuation reserve of

$3,748,900

is due to the expiration of

$67,800

of research and development credits and a recovery of

$3,681,000

due to the likelihood that the Company will be profitable enough to utilize the majority of the net operating loss and research and development and other credit carryforwards. The increase in the prior year valuation allowance of

$82,200

is due to additional reserves due to the losses during the past several years.

Because of the uncertainties involved with this significant estimate, it is reasonably possible that the Company’s estimate

may

change in the near term.

Net Operating Loss Carryforwards:

The Company has net operating loss and research and development and other credit carryforwards for tax purposes which expire as follows:

Tax Year Expires	NOLS		R& D & Other Credits
2018	$	-	$	44,980
2019		-		166,019
2020		-		195,753
2021		-		125,939
2022		-		48,573
2023		-		107,172
2024		-		156,392
2025		-		155,394
2026		-		139,885
2027		-		154,991
2028		-		152,732
2029		1,587,809		68,676
2030		942,727		31,081
2031		358,744		44,712
2032		622,879		59,085
2033		33,807		111,323
2034		186,708		73,198
2035		99,688		76,429
2036		-		107,315
	$	3,832,362	$	2,019,649