Note 9 - Income Taxes

12 Months Ended

Dec. 25, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

(9) Income Taxes

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

	2021			2020
Current:
Federal	$	--		$	(39,877	)
State		11,967			456
Current income tax provision (benefit):		11,967			(39,421	)
Deferred:
Federal		(2,156,278	)		33,873
State		(562,667	)		(3,000	)
Deferred income tax provision (benefit), net		(2,718,945	)		30,873
Total	$	(2,706,978	)	$	(8,548	)

Deferred tax assets as of December 25, 2021 and December 26, 2020 are as follows:

	December 25, 2021		December 26, 2020
Deferred Tax Assets:
Net operating loss carryforwards	$	1,050,449	$	746,397
Stock compensation		157,845		540,281
Credit carryforwards		1,285,119		1,288,897
Inventory		77,563		116,153
Accrued liabilities		12,390		22,140
Depreciation		237,880		250,093
Other		2,732		2,732
Gross deferred tax assets		2,823,978		2,966,693
Valuation allowance		0		(2,849,693	)
Net deferred tax assets	$	2,823,978	$	117,000

At December 25, 2021 and December 26, 2020 the Company had net operating loss carryforwards of approximately $3,768,032 and $2,754,601, respectively, available to offset future income for U.S. Federal income tax purposes. These net operating loss carryforwards occurred over several years, which begin to expire in the year ended 12/31/2036.

The Company established a valuation reserve as it is judged more likely than not that all or a portion of the tax credits will not be used before they expire. This decision was initially reached in 2018 after giving greater weight to its losses over the last three years compared with its forecast of the future.

In September 2021 this decision was reevaluated in light of the Company’s recent profitability and its forecasts for future profitability. The Company concluded that it is “more likely than not” that the Company will be able to fully utilize the deferred tax asset. This reversal of the valuation allowance was made net of the expected tax liability for 2021.

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

	2021			2020
Gross deferred tax balance at beginning of year	$	2,966,693		$	3,321,611
Deferred tax benefit (provision)		(142,715	)		(354,918	)
Valuation allowance		0			(2,849,693	)
Balance at end of year, net	$	2,823,978		$	117,000

Income tax expense is different from the amounts computed by applying the U.S. federal statutory income tax rate of 21 percent to pretax income as a result of the following:

	2021			2020
Tax at statutory rate	$	106,869		$	188,899
State tax, net of federal benefit		36,301			360
Net operating loss and credit carryforwards		--			33,873
Valuation allowance		(2,849,693	)		(324,045	)
Other		(455	)		92,365
Total	$	(2,706,978	)	$	(8,548	)

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 2018 through 2021.