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INCOME TAXES | 12 Months Ended
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May 31, 2012
Income Tax Disclosure [Text Block] | 7. INCOME TAXES Income tax expense from continuing operations for the years ended May 31, 2012 and 2011 consists of the following current provisions:
|  |  | 2012 |  | 2011
Current: |  |  |  |
| U.S. Federal | $ | -- | $ | --
State and local |  | 63,414 |  | 1,999
Current |  |  | 63,414 |  | 1,999
Deferred: |  |  |  |
| U.S. Federal | -- |  | --
| State and local |  | 1,600 |  | --
Deferred |  | 1,600 |  | --
Income tax | $ | 65,014 | $ | 1,999
Income tax benefit from continuing operations differs from the amounts computed by applying the U.S. Federal income tax rate of 35 percent to pretax loss as a result of the following:
Years ended May 31, |  | 2012 |  | 2011
Computed "expected" tax expense (benefit) | $ | 215,000 | $ | 56,000
Increase (reduction) in income taxes resulting from: |  |  |  |
| True up of carry forwards and other items |  | 30,000 |  | (53,001)
| Change in valuation allowance |  | -- |  | 11,000
| State income taxes, net of federal benefit |  | 36,000 |  | 9,000
| Utilization of NOL carry forward |  | (219,000) |  | --
| Research and development tax credits |  | (4,000) |  | (31,000)
| Permanent tax differences and other |  | 7,014 |  | 10,000
Income tax benefit from continuing operations | $ | 65,014 | $ | 1,999
The tax effect of significant temporary differences are presented below:
Years ended May 31, |  | 2012 |  | 2011
Deferred tax assets: |  |  |  |
| Accounts receivable, principally due to allowance for doubtful accounts and sales returns | $ | 46,000 | $ | 13,000
| Inventory valuation |  | 30,000 |  | 34,000
| Compensated absences and deferred payroll |  | 70,000 |  | 50,000
| Net operating loss carryforwards |  | 327,000 |  | 583,000
| Tax credit carryforwards |  | 83,000 |  | 99,000
| Deferred rent expense |  | 31,000 |  | 30,000
| Other |  | 77,000 |  | 70,000
Total deferred tax assets |  | 664,000 |  | 879,000
Less valuation allowance |  | (280,000) |  | (511,000)
|  | Deferred Tax Asset Net |  | 384,000 |  | 368,000
Deferred tax liabilities: |  |  |  |
| Accumulated depreciation of property and equipment |  | (146,000) |  | (130,000)
Net deferred tax asset | $ | 238,000 | $ | 238,000
Deferred tax assets, current portion | $ | 177,000 | $ | 127,000
Deferred tax assets, long-term portion |  | 61,000 |  | 111,000
Deferred tax assets, Total | $ | 238,000 | $ | 238,000
The Company has provided a valuation allowance of $280,000 and $511,000 as of May 31, 2012 and 2011, respectively. Because the Company has not achieved taxable net income consistently over the previous four fiscal years, predicting future taxable income is difficult and influenced by many factors. After analyzing the Company’s tax position, management has provided an allowance for the uncertainty of its future income. The net change in the valuation allowance for the years ended May 31, 2012 and 2011 was a decrease of $231,000 and an increase of $11,000, respectively. At May 31, 2012 and 2011, the Company has federal income tax net operating loss carryforwards of approximately $848,000 and $1,595,000 respectively. Of the reported net operating loss carryforwards, approximately $211,000 are related to windfall tax benefits from the exercise of the Company’s stock options by certain employees. Pursuant to ASC 718, the federal benefit of approximately $74,000 associated with this portion of the net operating loss will be credited to additional paid-in capital when the tax benefits are actually realized. The federal net operating loss carryforwards begin to expire in 2021. At May 31, 2012 and 2011, the Company has California state income tax net operating loss carryforwards of approximately $527,000 and $439,000, respectively. The state net operating loss carryforwards begin to expire in 2025. At May 31, 2012 and 2011, the Company has federal research and development tax credit carryforward of approximately $83,000 and $76,000, respectively. The federal credits begin to expire in 2027. The Company also had similar credit carry forwards for state purposes of $16,000 and $0, respectively, as $21,000 were utilized in 2012. Pursuant to Internal Revenue Code Sections 382 and 383, annual use of the Company's net operating loss ("NOL") and credit carryforwards may be limited by statute because of a cumulative change in ownership of more than 50%. Pursuant to Sections 382 and 383 of the Code, the annual use of the Company's NOLs would be limited if there is a cumulative change of ownership (as that term is defined in Section 382(g) of the Code) of greater than 50% in a three year period. Based on management's analysis the Company does not believe that a cumulative change in ownership of greater than 50% has taken place. For the fiscal year ended May 31, 2012 and 2011, the Company did an analysis of its ASC 740 position and has not identified any uncertain tax positions as defined under ASC 740. Should such position be identified in the future and should the Company owe interest and penalties as a result of this, these would be recognized as interest expense and other expense, respectively, in the financial statements. The Company is no longer subject to any significant U.S. federal tax examinations by tax authorities for years before fiscal year 2008.

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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 Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: 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=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: 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 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: 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 Reference 7: 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 8: 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 + Details
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