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Income Taxes | 12 Months Ended
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Dec. 31, 2016
Income Taxes [Abstract] |
INCOME TAXES |
14. | INCOME TAXES
Our income tax expense aggregated $249,874 and $850,309 during the years ended December 31, 2016 and 2015, respectively. In 2015, we utilized $1,625,653 of net operating loss carryforwards to offset otherwise taxable income. As of December 31, 2015, we had federal net operating loss carryforwards of $125,797 (that expire in 2031, (if not utilized before then) of which approximately $98,000 is expected to be utilized against taxable income during 2016. As of December 31, 2016, we have federal general business tax credit carryforwards of approximately $292,000 that expire in 2027 through 2034 (if not utilized before then) and state tax credit carryforwards of approximately $152,000 that expire in 2023 through 2036 (if not utilized before then). The $965,000 licensing payment that we made during the fourth quarter of 2004 was treated as an intangible asset and is being amortized over 15 years, for tax return purposes only. Approximately $1,112,000 of our investment in a small-scale facility to produce the Drug Substance (our Active Pharmaceutical Ingredient, Nisin) for Mast Out® was expensed as incurred for our books. Included in this amount is approximately $820,000 that was capitalized and is being depreciated over statutory periods for tax return purposes only. The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. We record a valuation allowance to reduce our deferred tax assets to the amount that is more likely than not to be realized. While we consider future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance, in the event we were to determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, a reduction to the deferred tax asset would be charged to income in the period such determination was made. Net operating loss carryforwards, credits, and other tax attributes are subject to review and possible adjustment by the Internal Revenue Service. Section 382 of the Internal Revenue Code contains provisions that could place annual limitations on the future utilization of net operating loss carryforwards and credits in the event of a change in ownership of the Company, as defined. The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2013. We currently have no tax examinations in progress. We also have not paid additional taxes, interest or penalties as a result of tax examinations nor do we have any unrecognized tax benefits for any of the periods in the accompanying financial statements. The income tax provision consisted of the following:
|  | Year Ended December 31,
|  | 2016 |  |  | 2015 |
Federal |  |  | - |  |  |  | - |
State |  | $ | 13,585 |  |  | $ | 3,150 |
Current |  | $ | 13,585 |  |  | $ | 3,150 |
Federal |  |  | 252,659 |  |  |  | 641,733 |
State |  |  | (16,370 | ) |  |  | 205,426 |
Deferred |  |  | 236,289 |  |  |  | 847,159 |
Total |  | $ | 249,874 |  |  | $ | 850,309 |
The actual income tax expense differs from the expected tax computed by applying the U.S. federal corporate tax rate of 34% to income before income tax as follows:
|  | Year Ended December 31, |
|  | 2016 |  |  | 2015 |
|  | $ |  |  | % |  |  | $ |  |  | % |
Computed expected tax expense/rate |  | $ | 257,829 |  |  |  | 34.00 | % |  | $ | 701,607 |  |  |  | 34.00 | %
State income taxes, net of federal expense |  |  | 38,855 |  |  |  | 5.12 |  |  |  | 44,754 |  |  |  | 2.17 |
Share-based compensation |  |  | 13,362 |  |  |  | 1.76 |  |  |  | (7,524 | ) |  |  | (0.36 | )
Tax credits |  |  | (70,967 | ) |  |  | (9.36 | ) |  |  | (54,719 | ) |  |  | (2.65 | )
State income tax rate change, net of federal(1) |  |  | - |  |  |  | - |  |  |  | 109,112 |  |  |  | 5.29 |
Other |  |  | 10,795 |  |  |  | 1.43 |  |  |  | 57,079 |  |  |  | 2.76 |
Total income tax expense/rate |  | $ | 249,874 |  |  |  | 32.95 | % |  | $ | 850,309 |  |  |  | 41.21 | %
(1) | This impact is due to the actual state tax rate in 2015 being lower than the expected state tax rate used in computing prior deferred taxes.
The significant components of our deferred tax asset consisted of the following:
|  | As of December 31, |
|  | 2016 |  |  | 2015 |
Product rights |  | $ | 68,197 |  |  | $ | 91,344 |
Property, plant and equipment |  |  | (307,976 | ) |  |  | (26,717 | )
Federal and state tax credits |  |  | 292,516 |  |  |  | 339,585 |
Federal net operating loss carryforward |  |  | 8,856 |  |  |  | 39,241 |
State tax credits carryover |  |  | 100,528 |  |  |  | - |
Interest rate swap |  |  | 13,437 |  |  |  | 28,253 |
Prepaid expenses and other |  |  | (6,240 | ) |  |  | (19,589 | )
UNICAP |  |  | 31,685 |  |  |  | - |
Deferred tax asset |  | $ | 201,003 |  |  | $ | 452,117

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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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