Note 12 - Income Taxes

3 Months Ended

Dec. 31, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

12.

INCOME TAXES

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

	Three Months			Fiscal Year			Fiscal Year			Fiscal Year
	December 31, 2017			September 30, 2017			September 30, 2016			September 30, 2015
Income (Loss) Before Provision for (Recovery of) Income Taxes	$	1,177,991		$	2,188,760		$	1,333,248		$	(122,377	)
Statutory rate		34	%		34	%		34	%		34	%
Tax at statutory rate		400,517			744,178			453,304			(41,608	)
Permanent differences		2,055			5,465			1,000			900
Research and development and other credits - net		-			(77,220	)		(47,400	)		(48,500	)
Valuation allowance		(452,681	)		-			(3,681,100	)		82,200
State Tax		25,654			130,560			-			-
State Net Operating Loss		-			(174,223	)		-			-
Transaction Costs		-			95,849			-			-
Deferred Adjustments - change in tax rates		290,965			-			-			-
Change in Reserve for uncertain tax positions		395,000			-			-			-
Other		6,219			55,755			(25,404	)		7,008
Provision for (recovery of) income taxes	$	667,729		$	780,364		$	(3,299,600	)	$	-

Deferred tax assets (liabilities) consist of the following:

	December 31, 201 7			September 30, 201 7			September 30, 201 6
Inventorie s	$	116,673		$	291,338		$	302,600
Bad debt s		13,799			21,171			3,400
Accrued liabilitie s		140,280			88,817			77,700
Prepaid expens e		(59,085	)		(73,120	)		(8,900	)
Depreciation and amortizatio n		166,798			220,967			93,000
Research and development and other credit carryforwards		2,150,820			2,179,462			2,019,700
Net operating loss carryforwar d		59,852			520,087			1,303,000
Directors stock option pla n		27,074			41,537			40,100
Total deferred tax asset		2,616,211			3,290,259			3,830,600
Valuation allowanc e		(47,319	)		(500,000	)		(500,000	)
Reserve for uncertain tax position s		(395,000	)		-			-
Total reserves & allowance s		(442,319	)		(500,000	)		(500,000	)
Net deferred tax asse t	$	2,173,892		$	2,790,259		$	3,330,600

On

December 22, 2017,

the Tax Cuts and Jobs Act of

2017

was signed into law. As a result, the Company recorded tax expense

of

$0.3

million due to a remeasurement of deferred tax assets and liabilities based upon the decrease in the corporate tax rate from

34%

to

21%

.

Valuation Allowance

The Company recorded a tax benefit of approximately

$0.5

million related to the reduction of the valuation allowance for deferred tax assets at

December 31, 2017.

The reduction in the valuation allowance is related to the utilization of a significant amount of the net operating loss carryforward and the Company’s expectation that the majority of the research and development and other credit carryforwards will be utilized in the future

.

Reserve for Uncertain Tax Positions

At

December 31, 2017,

the Company recorded a reserve of

$0.4

million for unrecognized tax benefits related to exposures in accordance with ASC

740.

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 federal and state net operating loss (NOL) and research and development (R&D) and other credit carryforwards for tax purposes which expire as follows:

Tax Year Expires	Federal NOLS		State NOLS		R& D & Other Credits
2018	$	-	$	-	$	166,019
2019		-		-		198,072
2020		-		-		126,620
2021		-		-		48,573
2022		-		-		107,172
2023		-		-		156,392
2024		-		-		155,394
2025		-		-		139,885
2026		-		-		154,991
2027		-		-		152,732
2028		-		-		68,676
2029		-		-		31,081
2030		-		-		44,712
2031		-		-		59,085
2032		-		312,351		71,062
2033		-		532,837		73,198
2034		29,274		285,607		76,429
2035		99,688		-		73,315
2036		-		-		117,000
2037		-		-		-
2038 and beyond		-		-		130,412
	$	128,962	$	1,130,795	$	2,150,820