NOTE 12: INCOME TAXES
The annual provision (benefit) for income taxes differs from amounts computed by applying the maximum U.S. Federal income tax rate of 34% to pre-tax income as follows:
| February 28, 2017 | February 29, 2016 | |||||||
| Expected federal income tax | $ | 64,165 | $ | 252,321 | ||||
| State tax, net of federal | 10,002 | 39,059 | ||||||
| Research and development tax credits | (70,827 | ) | (135,904 | ) | ||||
| Overaccrual of prior year taxes | (63,351 | ) | (67,579 | ) | ||||
| Deferred tax expense | (5,080 | ) | 106,826 | |||||
| Permanent timing difference | 17,795 | — | ||||||
| Other adjustments | 27,922 | — | ||||||
| Income tax (Benefit) Expense | $ | (19,374 | ) | $ | 194,723 | |||
The deferred tax asset and liability are comprised of the following:
| February 28, | February 29, | |||||||
| 2017 | 2016 | |||||||
| Inventory | $ | 253,500 | $ | 87,000 | ||||
| Allowance for accounts receivable | 18,100 | 18,000 | ||||||
| Accrued expenses and other | 43,500 | 50,000 | ||||||
| Deferred tax asset - Current | 315,100 | 155,000 | ||||||
| Research tax credits | 143,000 | 102,000 | ||||||
| Accrued expenses | 13,000 | 15,000 | ||||||
| Intangible asset amortization | (30,000 | ) | (39,000 | ) | ||||
| Building and leasehold depreciation | (464,000 | ) | (250,000 | ) | ||||
| Deferred tax liability – Long Term | ($ | 338,000 | ) | ($ | 172,000 | ) | ||
At February 28, 2017 and February 29, 2016, the Company had $143,000 and $102,000 of research and development tax credits, respectively, being carried forward.