Note 10 - Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 10 – Income Taxes

At December 31, 2013, the Company had approximately $78,000 of capital loss carryforwards and $2,698,000 of net operating loss carryforwards, $125,000 of New York State investment tax credit carryforwards and $683,000 of federal research and development tax credits.

If not utilized, a portion of the capital loss carryover will expire in 2014, the investment tax credits expire from 2014 through 2028 and the research and development tax credits expire from 2028-2033. Based on the available objective evidence, including the Company’s history of taxable income and the character of that income, management believes it is more likely than not that these components of the Company’s deferred tax assets will be fully utilized. The Company did not provide for an allowance against its total net deferred tax assets at December 31, 2013 but has provided for a partial valuation allowance against its total net deferred tax assets at December 31, 2012 of approximately $475,000 attributable to these components.

The (benefit) expense for income taxes includes the following:

	2013			2012
Current:
Federal	$	----		$	135,031
State		----			7,782
Total current tax provision		----			142,813
Deferred:
Federal		(1,230,271	)		(150,999	)
State		(166,136	)		(27,308	)
Total deferred tax provision		(1,396,407	)		(178,307	)
Income tax benefit	$	(1,396,407	)	$	(35,494	)

The tax effects of temporary differences giving rise to significant portions of the net deferred taxes are as follows:

	2013			2012
Allowance for doubtful accounts	$	45,148		$	13,618
Inventory capitalization		36,591			15,792
Depreciation and amortization		(385,907	)		(585,231	)
Investment tax credits		600,000			600,000
Research & development tax credits		683,495			435,051
Compensation costs		239,876			235,384
Vacation accrual		274,307			250,046
Capital loss carryforward		1,135,794			268,237
Gross deferred tax asset		2,629,304			1,232,897
Less valuation allowance		(475,000	)		(475,000	)
Net deferred tax asset	$	2,154,304		$	757,897
Net current deferred tax asset		1,443,321			189,153
Net long-term deferred tax asset		710,983			568,744
Net deferred tax asset	$	2,154,304		$	757,897

The reconciliation of the federal statutory income tax rate to our effective tax rate is as follows:

	2013			2012
Expected provision at federal statutory tax rate (34%)	$	(665,288	)	$	136,031
State taxes, net of federal benefit		(109,650	)		(12,887	)
Stock-based compensation expense		(217,648	)		(112,008	)
Domestic production activities deduction		---			(16,298	)
Capital gains/(losses) carryforward		(111,225	)		104,138
Federal research & development credit		(248,444	)		(98,726	)
Other permanent differences		(44,152	)		(35,744	)
Income tax benefit	$	(1,396,407	)	$	(35,494	)