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Note 15 - Income Taxes | 12 Months Ended
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Aug. 31, 2016
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 15. INCOME TAXES The provision for income taxes for the fiscal years ended August 31, 2016 and 2015 consists of the following:
|  | Fiscal Year Ended August 31,
|  | 2016 |  | 2015
Current: |  |  |  |
Federal |  | $ | — |  |  | $ | — |
State |  |  | 20,000 |  |  |  | (37,000 | )
Foreign |  |  | 647,000 |  |  |  | 542,000 |
|  |  | 667,000 |  |  |  | 505,000 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 6,000 |  |  |  | 87,000 |
State |  |  | — |  |  |  | 5,000 |
Foreign |  |  | (47,000 | ) |  |  | 52,000 |
|  |  | (41,000 | ) |  |  | 144,000 |
|  | $ | 626,000 |  |  | $ | 649,000 |
Reconciliations of the expected federal income tax at the statutory rate with the provisions for income taxes for the fiscal years ended August 31, 2016 and 2015 are as follows:
|  | Fiscal Year Ended August 31,
|  | 2016 |  | 2015
Tax computed at statutory rates |  | $ | (195,000 | ) |  | $ | 1,076,000 |
State income tax, net of federal benefit |  |  | 20,000 |  |  |  | (32,000 | )
Tax effect on equity in (income) loss of international joint ventures |  |  | (956,000 | ) |  |  | (1,986,000 | )
Tax effect on dividends received from joint ventures and investment at carrying value |  |  | 2,681,000 |  |  |  | 1,470,000 |
Tax effect of foreign operations |  |  | 997,000 |  |  |  | 996,000 |
Foreign tax credit |  |  | (3,178,000 | ) |  |  | (1,937,000 | )
Research and development credit |  |  | (408,000 | ) |  |  | (314,000 | )
Valuation allowance |  |  | 1,620,000 |  |  |  | 1,379,000 |
Stock based compensation |  |  | 90,000 |  |  |  | 99,000 |
Non-controlling interest |  |  | (148,000 | ) |  |  | (204,000 | )
Other |  |  | 103,000 |  |  |  | 102,000 |
|  | $ | 626,000 |  |  | $ | 649,000 |
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 $17,779,912 and $18,483,377 at August 31, 2016 and 2015, respectively. During fiscal 2016, the Company recorded deferred income tax expense of $32,000 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, 2016 and 2015 are as follows:
|  | August 31,
|  | 2016 |  | 2015
Accrued compensation |  | $ | 150,600 |  |  | $ | 237,700 |
Inventory costs |  |  | 95,300 |  |  |  | 81,200 |
Accrued joint venture expenses |  |  | 54,200 |  |  |  | 93,200 |
Other accrued expenses |  |  | 87,000 |  |  |  | 53,800 |
Goodwill and other intangible assets |  |  | 1,332,000 |  |  |  | 1,123,200 |
Stock-based compensation |  |  | 210,600 |  |  |  | 308,900 |
Foreign tax credit carryforward |  |  | 5,679,000 |  |  |  | 4,654,800 |
Other credit and loss carryforwards |  |  | 3,214,300 |  |  |  | 2,262,000 |
Total deferred tax assets |  |  | 10,823,000 |  |  |  | 8,814,800 |
Valuation allowance |  |  | (8,893,300 | ) |  |  | (6,889,900 | )
Total deferred tax assets after valuation allowance |  |  | 1,929,700 |  |  |  | 1,924,900 |
Property and equipment |  |  | (215,600 | ) |  |  | (204,000 | )
Other |  |  | (74,300 | ) |  |  | (120,800 | )
Total deferred tax liabilities |  |  | (289,900 | ) |  |  | (324,800 | )
Net deferred tax assets |  | $ | 1,639,800 |  |  | $ | 1,600,100 |
The Company has revised the presentation of net deferred tax assets to comply with the disclosure guidance in ASC 740 to reflect total deferred tax assets and total deferred tax liabilities, rather than current deferred taxes and non-current deferred taxes. In November 2015, the FASB issued ASU 2015-17 which simplifies the presentation of deferred income taxes and requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. For public business entities, the amendments in ASU 2015-17 are effective for annual periods beginning after December 15, 2016. The Company has elected to early adopt ASU 2015-17 prospectively as of August 31, 2016. Prior periods were not retroactively adjusted. At August 31, 2016, the Company had foreign tax credit carryforwards of approximately $5,679,000, of which approximately $350,600 will expire if not utilized by August 31, 2017. In addition, the Company had federal and state tax credit carryforwards of $2,643,300 at August 31, 2016 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 $571,000 at August 31, 2016 which begin to expire in fiscal 2020. As of August 31, 2016, the Company recorded a valuation allowance of $5,679,000 with respect to the foreign tax credit carryforwards. In addition, the Company has recorded a valuation allowance of $2,643,300 with respect to federal and state tax credit carryforwards, and had recorded a valuation allowance of $571,000 with respect to the foreign net operating loss carryforwards. As of August 31, 2015, the Company had recorded a valuation allowance of $4,654,800 with respect to the foreign tax credit carryforwards. In addition, the Company had recorded a valuation allowance of $2,335,200 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 is a tabular reconciliation of the total amounts of unrecognized tax benefits:
|  | Fiscal Year Ended August 31,
|  | 2016 |  | 2015
Gross unrecognized tax benefits – beginning balance |  | $ | 203,000 |  |  | $ | 180,000 |
Gross increases - prior period tax positions |  |  | 15,000 |  |  |  | 15,000 |
Gross increases – current period tax positions |  |  | 20,000 |  |  |  | 8,000 |
Gross unrecognized tax benefits – ending balance |  | $ | 238,000 |  |  | $ | 203,000 |
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, 2016 and August 31, 2015. The Company is subject to taxation in the United States and various states and foreign jurisdictions. With few exceptions, as of August 31, 2016, the Company is no longer subject to federal, state, local, or foreign examinations by tax authorities for years prior to August 31, 2013.

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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=65882285&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=65882285&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=65882285&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=65882285&loc=d3e32537-109319 + Details
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