(8) Income Taxes

12 Months Ended

Dec. 30, 2017

Income Tax Disclosure [Abstract]

(8) Income Taxes

(8) Income Taxes

Components of income tax expense (benefit) for each year are as follows:

		2017		2016		2015
Current
Federal	$	(6,529)	$	—	$	(2,286)
State		(4,186)		456		456
Current income tax provision (benefit):		(10,715)		456		(1,830)
Deferred:
United States:
Federal		(246,458)		(526,922)		168,371
State		35,597		(149,678)		7,691
Deferred income tax provision (benefit), net		(211,317)		(676,600)		176,062
Total	$	(222,032)	$	(676,144)	$	174,232

Deferred tax assets as of December 30, 2017 and December 31, 2016 are as follows:

		December 30, 2017		December 31, 2016
Deferred Tax Assets:
Net operating loss
carryforwards	$	634,000	$	363,000
Stock compensation		478,000		628,000
Credit carryforwards		1,494,000		1,265,000
Inventory		235,000		369,000
Accrued liabilities		20,000		27,000
Depreciation		175,000		171,000
Other		3,000		4,000
Gross deferred tax assets		3,039,000		2,827,000
Valuation allowance		—		—
Net deferred tax assets	$	3,039,000	$	2,827,000

At December 30, 2017 and December 31, 2016 the Company had net operating loss carryforwards of approximately $2,367,000 and $923,000, respectively, available to offset future income for U.S. Federal income tax purposes.

On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (“the Act”). The Act makes significant changes to the U.S. tax code including the following:

· Reduction of the corporate federal income tax rate from 35% to 21%;

· Repeal of the domestic manufacturing deduction;

· Repeal of the corporate alternative minimum tax;

· Acceleration of business asset expensing.

Due to the Act, U.S. deferred tax assets and liabilities were re-measured from 35% to 21% resulting in an additional expense of $680,000 in the fourth quarter of 2017.

A valuation allowance is required to be established or maintained when it is "more likely than not" that all or a portion of deferred tax assets will not be realized. The Company believes that it will generate sufficient future taxable income to realize the tax benefits related to the remaining deferred tax assets. Current projections of future taxable income, including the reversal of temporary differences, reflect the Company’s belief that it has attractive growth opportunities and a favorable cost structure. These projections support the conclusion that the Company will generate taxable income sufficient to utilize the losses before they expire.

A summary of the change in the deferred tax asset is as follows:

		2017		2016		2015
Balance at beginning of year	$	2,827,349	$	2,150,749	$	2,300,465
Deferred tax (expense) benefit		211,317		676,600		(149,716)
Balance at end of year	$	3,038,666	$	2,827,349		$ 2, 150,749

Income tax expense is different from the amounts computed by applying the U.S. federal statutory income tax rate of 34 percent to pretax income as a result of the following:

		2017		2016		2015
Tax at statutory rate	$	(660,000)	$	(384,000)	$	212,000
State tax, net
of federal benefit		450		450		450
Net operating loss and
credit carryforwards		(282,450)		(249,450)		(34,450)
Effect of tax cuts and jobs act		628,000		—		—
Other		92,000		(43,000)		(4,000)
Total	$	(222,000)	$	(676,000)	$	174,000

The Company’s income tax filings are subject to review and examination by federal and state taxing authorities. The Company is currently open to audit under the applicable statutes of limitations for the years 2014 through 2017.