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INCOME TAXES | 12 Months Ended
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May 31, 2018
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | 6. INCOME TAXES Income tax (expense) benefit from continuing operations for the years ended May 31, 2018 and 2017 consists of the following:
Years ended May 31, | 2018 |  | 2017
Current: |  |  |  |  |
U.S. Federal | $ | -- |  | $ | --
State and local |  | (800) |  |  | --
Total current |  | (800) |  |  | --
Deferred: |  |  |  |  |
U.S. Federal |  | (31,000) |  |  | --
State and local |  | -- |  |  | --
Total deferred |  | (31,000) |  |  | --
Income tax (expense) benefit | $ | (31,800) |  | $ | --
Income tax benefit (expense) from continuing operations differs from the amounts computed by applying the U.S. Federal income tax rate applicable for each year (blended rate for 2018 (35% and 21%) and 35% for 2017) to pretax income as a result of the following:
Years ended May 31, | 2018 |  | 2017
Computed "expected" tax benefit | $ | 418,258 |  | $ | 317,997
Increase (reduction) in income taxes resulting from: |  |  |  |  |
Change in valuation allowance |  | (114,000) |  |  | (397,000)
State income taxes, net of federal benefit |  | 71,794 |  |  | 30,215
Research and development tax credits |  | 46,602 |  |  | 40,205
Permanent tax differences and other |  | 78,795 |  |  | 8,583
Impact of tax rate changes |  | (533,249) |  |  | --
Income tax (expense) | $ | (31,800) |  | $ | --
The tax effect of significant temporary differences is presented below:
As of May 31, | 2018 |  | 2017
Deferred tax assets: |  |  |  |  |
Accounts receivable, principally due to allowance for doubtful accounts and sales returns | $ | 15,000 |  | $ | 19,000
Inventory valuation |  | 13,000 |  |  | 14,000
Compensated absences and deferred payroll |  | 49,000 |  |  | 62,000
Net operating loss carryforwards |  | 923,000 |  |  | 968,000
Tax credit carryforwards |  | 385,000 |  |  | 307,000
Deferred rent expense |  | 5,000 |  |  | 6,000
Other |  | 163,000 |  |  | 108,000
Accumulated depreciation and amortization |  | 6,000 |  |  | --
Total deferred tax assets |  | 1,559,000 |  |  | 1,484,000
Less valuation allowance |  | (1,549,000) |  |  | (1,435,000)
Deferred tax asset Net |  | 10,000 |  |  | 49,000
Deferred tax liabilities: |  |  |  |  |
Accumulated depreciation of property and equipment |  | -- |  |  | (8,000)
Net deferred tax asset | $ | 10,000 |  | $ | 41,000
The Company has provided a valuation allowance of approximately $1,549,000 and $1,435,000 as of May 31, 2018 and 2017, respectively. The net change in the valuation allowance for the years ended May 31, 2018 and 2017 was an increase of approximately $114,000 and $397,000, respectively. The federal statutory tax rate of 35% has been changed to 21% for fiscal years beginning in 2019. Deferred tax assets as of May 31, 2018 have been adjusted to reflect the change in tax rates. At May 31, 2018, the Company has federal income tax net operating loss carryforwards of approximately $4,565,000. The federal net operating loss carryforwards begin to expire in 2030. At May 31, 2018, the Company has California state income tax net operating loss carryforwards of approximately $2,918,000. At May 31, 2018, the Company has federal research and development tax credit carryforward of approximately $323,000. The federal credits begin to expire in 2027. The Company also had similar credit carryforwards for state purposes of $62,000 at May 31, 2018. 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 year ended May 31, 2018, 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 consolidated financial statements. The Company is no longer subject to any significant U.S. federal tax examinations by tax authorities for years before fiscal year 2013. At May 31, 2018, the Company has German net operating loss carryforwards from its foreign subsidiary of approximately $35,000, resulting in a deferred tax asset of $10,000. No valuation allowance has been established for the German deferred tax asset.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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