Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.20.2
INCOME TAXES
 12 Months Ended
Aug. 31, 2020
INCOME TAXES [Abstract]  
INCOME TAXES
NOTE 10 – INCOME TAXES

The Company recorded income tax expense of $2.2 million and an income tax benefit of $1.3 million for the fiscal years ended August 31, 2020 and 2019. The net expense during the fiscal year ended August 31, 2020, consisted of current income tax expense of $0 and deferred income tax expense of $2.2 million. The deferred tax expense consists of the usage of the Company’s $2.2 million net operating loss carryforwards and the timing difference between book and tax depreciation of fixed assets.

The Company’s effective income tax rate was 24.4% and (36.4%) for fiscal years August 31, 2020 and 2019. The Company’s effective tax rate was a benefit for 2019 due to the release of its valuation allowance on its deferred tax assets.

The Company paid Federal and State tax installments of $1,089,700 and $215,500, respectively, during fiscal year ended August 31, 2020. No taxes were paid during the fiscal year ended August 31, 2019.

Deferred income taxes reflect the tax effects of net operating loss carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets as of August 31 are as follows:

   
For the Fiscal Years Ended August 31,
  
   
2020
    
2019
  
Deferred tax assets (liabilities):
            
Net operating loss carryforwards
  
$
22,922
    
$
609,439
  
AMT credit carryforward
    
—
      
—
  
Accrued compensation
    
166,948
      
113,559
  
Deferred revenues
    
88,994
      
149,895
  
Depreciation and depletion
    
(1,700,771
)
    
(46,408
)
Non-qualified stock options
    
490,952
      
410,633
  
Other
    
45,323
      
46,128
  
Valuation allowance
    
—
      
—
  
Net deferred tax (liability) asset
  
$
(885,632
)
  
$
1,283,246
  

As of August 31, 2020 and August 31, 2019 the Company had no liability for unrecognized tax benefits.

The Company maintained a valuation allowance on the net deferred tax asset other than AMT credit carryforwards through fiscal year August 31, 2018. During the fiscal year ended August 31, 2019, the Company had determined it is more likely than not that the Company will realize its deferred tax assets, which consist primarily net operating loss carryforwards. The Company assessed the realizability of its deferred tax assets using all available evidence; considering both historical results and projections of profitability for the reasonably foreseeable future periods. As a result of the Company’s annual reassessment of its conclusions regarding the realization of its deferred tax assets at each financial reporting date, the Company concluded that its deferred tax assets were realizable, and therefore, the valuation allowance was no longer necessary. By releasing the valuation allowance, the Company recognized a deferred tax benefit of approximately $1,284,100 which positively impacted the Company’s results of operations and financial position.

Income taxes computed using the federal statutory income tax rate differs from the Company’s effective tax rate primarily due to the following for the fiscal years ended August 31:

   
For the Fiscal Years Ended August 31,
  
   
2020
    
2019
  
Expected benefit from federal taxes at statutory rate of 21% for the years 2020 and 2019
  
$
1,873,021
    
$
740,870
  
State taxes, net of federal benefit
    
326,441
      
129,123
  
Permanent and other differences
    
2,137
      
10,388
  
NOL true up
    
(8,240
)
    
225,067
  
Non-qualified stock options adjustment
    
—
      
(348,441
)
Other
    
(24,566
)
    
(26,202
)
Change in valuation allowance
    
—
      
(2,014,000
)
Total income tax expense / (benefit)
  
$
2,168,793
    
$
(1,283,195
)

At August 31, 2020, the Company has $109,200 of net operating loss carryforwards available for income tax purposes. The net operating loss carryforwards expire at various times beginning in 2036 and ending in 2038 for federal income tax purposes and expire at various times beginning in 2035 and ending in 2036 for state income tax purposes. At August 31, 2019, the Company had $2.5 million of net operating loss carryforwards available for income tax purposes.

No net operating loss carryforwards expired during the fiscal year ended August 31, 2020 or 2019.