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Note 17 - Income Taxes | 12 Months Ended
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Aug. 31, 2015
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 17. INCOME TAXES The provision for income taxes for the fiscal years ended August 31, 2015, 2014 and 2013 consists of the following:
|  | Fiscal Year Ended August 31,
|  | 2015 |  | 2014 |  | 2013
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | — |  |  | $ | — |  |  | $ | — |
State |  |  | (37,000 | ) |  |  | 19,000 |  |  |  | 8,000 |
Foreign |  |  | 542,000 |  |  |  | 1,200,000 |  |  |  | 731,000 |
|  |  | 505,000 |  |  |  | 1,219,000 |  |  |  | 739,000 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | 87,000 |  |  |  | (89,000 | ) |  |  | 118,000 |
State |  |  | 5,000 |  |  |  | (6,000 | ) |  |  | 7,000 |
Foreign |  |  | 52,000 |  |  |  | — |  |  |  | — |
|  |  | 144,000 |  |  |  | (95,000 | ) |  |  | 125,000 |
|  | $ | 649,000 |  |  | $ | 1,124,000 |  |  | $ | 864,000 |
Reconciliations of the expected federal income tax at the statutory rate with the provisions for income taxes for the fiscal years ended August 31, 2015, 2014 and 2013 are as follows:
|  | Fiscal Year Ended August 31,
|  | 2015 |  | 2014 |  | 2013
Tax computed at statutory rates |  | $ | 1,076,000 |  |  | $ | 2,265,000 |  |  | $ | 1,910,000 |
State income tax, net of federal benefit |  |  | (32,000 | ) |  |  | 13,000 |  |  |  | 15,000 |
Tax effect on equity in (income) loss of international joint ventures |  |  | (1,986,000 | ) |  |  | (2,055,000 | ) |  |  | (1,781,000 | )
Tax effect on dividends received from joint ventures |  |  | 1,470,000 |  |  |  | 3,285,000 |  |  |  | 1,732,000 |
Tax effect of foreign operations |  |  | 996,000 |  |  |  | 1,131,000 |  |  |  | 807,000 |
Foreign tax credit |  |  | (1,937,000 | ) |  |  | (3,710,000 | ) |  |  | (2,524,000 | )
Research and development credit |  |  | (314,000 | ) |  |  | (88,000 | ) |  |  | (364,000 | )
Valuation allowance |  |  | 1,379,000 |  |  |  | 687,000 |  |  |  | 1,635,000 |
Tax-exempt income |  |  | - |  |  |  | - |  |  |  | (230,000 | )
Stock based compensation |  |  | 99,000 |  |  |  | - |  |  |  | - |
Non-controlling interest in partnership income |  |  | (204,000 | ) |  |  | (440,000 | ) |  |  | (425,000 | )
Other |  |  | 102,000 |  |  |  | 36,000 |  |  |  | 89,000 |
|  | $ | 649,000 |  |  | $ | 1,124,000 |  |  | $ | 864,000 |
The Company has not provided U.S. income taxes or foreign withholding taxes with respect to its portion of the cumulative undistributed earnings of foreign joint ventures that are essentially permanent in duration. The Company’s portion of the cumulative undistributed earnings of foreign joint ventures that are essentially permanent in duration were $18,483,377, $20,540,523 and $22,281,510 at August 31, 2015, 2014 and 2013, respectively. During fiscal 2015, the Company recorded deferred income tax expense of $79,000 representing foreign withholding taxes to be paid with respect to the portion of the cumulative undistributed earnings of foreign joint ventures that it determined were not essentially permanent in duration. If some or all of the undistributed earnings of the joint ventures are remitted to the Company in the future, income taxes, if any, after the application of foreign tax credits will be provided at that time. To the extent undistributed earnings of the Company’s joint ventures are distributed in the future, it is not expected to result in any material additional U.S. income tax liability after the application of foreign tax credits. The tax effect of the temporary differences and tax carryforwards comprising the net deferred taxes shown on the consolidated balance sheets at August 31, 2015 and 2014 are as follows:
|  | August 31,
|  | 2015 |  | 2014
Current: |  |  |  |  |  |  |  |
Accrued bonus |  | $ | 174,000 |  |  | $ | 524,000 |
Allowance for doubtful accounts |  |  | 14,500 |  |  |  | 14,500 |
Inventory costs |  |  | 81,200 |  |  |  | 100,800 |
Prepaid expenses and other |  |  | (41,800 | ) |  |  | (40,600 | )
Other accrued expenses |  |  | 102,100 |  |  |  | 86,800 |
Deferred joint venture expenses |  |  | 93,200 |  |  |  | 104,100 |
Total current |  | $ | 424,100 |  |  | $ | 789,600 |
Noncurrent: |  |  |  |  |  |  |  |
Property and equipment |  | $ | (204,000 | ) |  | $ | (171,200 | )
Goodwill |  |  | 19,400 |  |  |  | 27,300 |
Other intangible assets |  |  | 1,103,800 |  |  |  | 825,200 |
Nonqualified stock options |  |  | 308,900 |  |  |  | 260,400 |
Foreign net operating loss carryforward |  |  | 26,800 |  |  |  | - |
Capital loss carryforward |  |  | - |  |  |  | 50,900 |
Foreign tax credit carryforward |  |  | 4,654,800 |  |  |  | 4,141,100 |
Investment in foreign joint ventures |  |  | (79,000 | ) |  |  | - |
Research and development credit |  |  | 2,224,600 |  |  |  | 1,910,800 |
New hire retention credit |  |  | 10,600 |  |  |  | 10,600 |
|  |  | 8,065,900 |  |  |  | 7,055,100 |
Valuation allowance |  |  | (6,889,900 | ) |  |  | (6,113,400 | )
Total noncurrent |  |  | 1,176,000 |  |  |  | 941,700 |
At August 31, 2015, the Company had foreign tax credit carryforwards of approximately $4,654,800, of which approximately $187,400 will expire if not utilized by August 31, 2016. In addition, the Company had federal and state tax credit carryforwards of $2,235,200 at August 31, 2015 which begin to expire in fiscal 2019. These federal and state tax credit carryforwards consist primarily of federal and Minnesota research and development credit carryforwards. The Company also has foreign net operating loss carryforwards of $26,800 at August 31, 2015 which begin to expire in fiscal 2020. As of August 31, 2015, the Company recorded a valuation allowance of $4,654,800 with respect to the foreign tax credit carryforwards. In addition, the Company has recorded a valuation allowance of $2,335,100 with respect to federal and state tax credit carryforwards. As of August 31, 2014, the Company recorded a valuation allowance of $4,141,100 with respect to the foreign tax credit carryforwards. In addition, the Company has recorded a valuation allowance of $1,919,800 with respect to federal and state tax credit carryforwards. The Company records a tax valuation allowance to reduce deferred tax assets to the amount expected to be realized when it is more likely than not that some portion or all of its deferred tax assets will not be realized. The Company determined based on all available evidence, including historical data and projections of future results, that it is more likely than not that all of its deferred tax assets, except for its foreign tax credit carryforward, federal and Minnesota research and development credit carryforwards, and capital loss carryforwards will be fully realized. The Company determined that its deferred tax asset related to foreign tax credit carryforwards will not be realized due to insufficient federal taxable income within the carryforward period and the fact that for ordering purposes the foreign tax credit carryforwards are not allowed to be used until after any current year foreign tax credits are utilized. In addition, based on historical data and future projections, the Company determined that it is more likely than not that its deferred tax asset related to federal and Minnesota research and development credit carryforwards will not be realized due to insufficient federal and Minnesota taxable income within the carryforward period after considering the foreign tax credit usage. The following table is a tabular rollforward for the valuation allowance:
August 31, 2012 |  | $ | 4,933,100 |
Adjustment to valuation allowance |  |  | 1,153,000 |
August 31, 2013 |  | $ | 6,086,100 |
Adjustment to valuation allowance |  |  | 27,300 |
August 31, 2014 |  |  | 6,113,400 |
Adjustment to valuation allowance |  |  | 776,500 |
August 31, 2015 |  | $ | 6,889,900 |
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
|  | Fiscal Year Ended August 31,
|  | 2015 |  | 2014
Gross unrecognized tax benefits – beginning balance |  | $ | 180,000 |  |  | $ | 170,000 |
Gross increases - prior period tax positions |  |  | 15,000 |  |  |  | 2,000 |
Gross increases – current period tax positions |  |  | 8,000 |  |  |  | 8,000 |
Gross unrecognized tax benefits – ending balance |  | $ | 203,000 |  |  | $ | 180,000 |
The entire amount of unrecognized tax benefits would affect the effective tax rate. It is not expected that the amount of unrecognized tax benefits will change significantly in the next 12 months. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the Company’s income tax provision. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet. There was no liability for the payment of interest and penalties at both August 31, 2015 and August 31, 2014. The Company is subject to taxation in the United States and various states and foreign jurisdictions. With few exceptions, as of August 31, 2015, the Company is no longer subject to federal, state, local, or foreign examinations by tax authorities for years prior to August 31, 2012.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 + Details
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