Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2018

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			Year			Fiscal Year
	December 31, 2017			December 31, 2018			September 30, 2017
Income Before Provision for Income Taxes	$	1,177,991		$	5,281,730		$	2,188,760
Statutory rate		34	%		21	%		34	%
Tax at statutory rate		400,517			1,109,163			744,178
Permanent differences		2,055			196,142			5,465
Research and development and other credits - net		-			-			(77,220	)
Valuation allowance		(452,681	)		-			-
State Tax		25,654			79,165			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			-			-
Return to Provision Adjustments and Other		6,219			283,550			55,755
Provision for income taxes	$	667,729		$	1,668,020		$	780,364

Deferred tax assets (liabilities) consist of the following: 

	December 31, 2018			December 31, 2017
Inventories	$	145,844		$	116,673
Bad debts		8,773			13,799
Accrued liabilities		281,475			140,280
Prepaid expense		(95,371	)		(59,085	)
Depreciation and amortization		(2,928,232	)		166,798
Research and development and other credit carryforwards		1,266,043			2,150,820
Net operating loss carryforward		-			59,852
Directors stock option plan		62,134			27,074
Total deferred tax asset (liability)		(1,259,334	)		2,616,211
Valuation allowance		(47,319	)		(47,319	)
Reserve for uncertain tax positions		(395,000	)		(395,000	)
Total reserves & allowances		(442,319	)		(442,319	)
Net deferred tax asset (liability)	$	(1,701,653	)	$	2,173,892

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. The Company believes the valuation allowance of

$47,319

at

December 31, 2018

and

2017,

respectively, is adequate.

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.

The Company believes the valuation allowance of

$0.4

million at

December 31, 2018

and

2017,

respectively, is adequate. Due to 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:

 

At

December 31, 2018,

the Company has 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	State Credits		R& D & Other Credits
2019	$	-	$	2,319
2020		-		3,000
2021		-		3,000
2022		-		3,000
2023		-		3,000
2024		-		3,000
2025		-		3,000
2026		-		86,366
2027		-		152,732
2028		-		68,676
2029		-		31,081
2030		-		44,712
2031		-		59,085
2032		-		71,062
2033		-		73,198
2034		38,127		76,429
2035		111,708		73,315
2036 and beyond		359,233		-
	$	509,068	$	756,975