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INCOME TAXES | 12 Months Ended
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May 31, 2014
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | 7. INCOME TAXES Income tax (benefit) expense from continuing operations for the years ended May 31, 2014 and 2013 consists of the following current provisions:
| 2014 |  | 2013
Current: |  |  |  |  |
U.S. Federal | $ | -- |  | $ | --
State and local |  | 6,240 |  |  | (21,493)
Total current |  | 6,240 |  |  | (21,493)
Deferred: |  |  |  |  |
U.S. Federal |  | (174,000) |  |  | (521)
State and local |  | (43,000) |  |  | 9,521
Total deferred |  | (217,000) |  |  | 9,000
Income tax (benefit) expense | $ | (210,760) |  | $ | (12,493)
Income tax (benefit) expense from continuing operations differs from the amounts computed by applying the U.S. Federal income tax rate of 35 percent to pretax income as a result of the following:
Years ended May 31, | 2014 |  | 2013
Computed "expected" tax expense (benefit) | $ | (148,760) |  | $ | 184,000
Increase (reduction) in income taxes resulting from: |  |  |  |  |
Change in valuation allowance |  | -- |  |  | (205,000)
State income taxes, net of federal benefit |  | (47,000) |  |  | 15,000
Research and development tax credits |  | (26,000) |  |  | (14,000)
Permanent tax differences and other |  | 11,000 |  |  | 7,507
Income tax (benefit) expense | $ | (210,760) |  | $ | (12,493)
The tax effect of significant temporary differences is presented below:
Years ended May 31, | 2014 |  | 2013
Deferred tax assets: |  |  |  |  |
Accounts receivable, principally due to allowance for doubtful accounts and sales returns | $ | 11,000 |  | $ | 47,000
Inventory valuation |  | 16,000 |  |  | 32,000
Compensated absences and deferred payroll |  | 39,000 |  |  | 37,000
Net operating loss carryforwards |  | 325,000 |  |  | 94,000
Tax credit carryforwards |  | 160,000 |  |  | 117,000
Deferred rent expense |  | 21,000 |  |  | 28,000
Other |  | 48,000 |  |  | 42,000
Total deferred tax assets |  | 620,000 |  |  | 397,000
Less valuation allowance |  | -- |  |  | --
Deferred Tax Asset Net |  | 620,000 |  |  | 397,000
Deferred tax liabilities: |  |  |  |  |
Accumulated depreciation of property and equipment |  | (174,000) |  |  | (168,000)
Net deferred tax asset | $ | 446,000 |  | $ | 229,000
Deferred tax assets, current portion | $ | 87,000 |  | $ | 144,000
Deferred tax assets, long-term portion |  | 359,000 |  |  | 85,000
Deferred tax asset, Total | $ | 446,000 |  | $ | 229,000
The Company has provided a valuation allowance of $0 as of May 31, 2014 and 2013, respectively. The net change in the valuation allowance for the years ended May 31, 2014 and 2013 was a decrease of $0 and $280,000, respectively. At May 31, 2014 and 2013, the Company has federal income tax net operating loss carryforwards of approximately $1,035,000 and $480,000, 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, 2014 and 2013, the Company has California state income tax net operating loss carryforwards of approximately $642,000 and $0, respectively. At May 31, 2014, the Company has federal research and development tax credit carryforward of approximately $146,000. The federal credits begin to expire in 2027. The Company also had similar credit carry forwards for state purposes of $14,000 at May 31, 2014. 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, 2014 and 2013, 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 2010.

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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 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 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=26873400&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 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 Reference 6: 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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