Income Taxes

12 Months Ended

Jan. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

11. Income Taxes

Income tax (benefit) expense for the years ended January 31, 2013 and 2012 consisted of:

	2013		2012
Current:
Federal	$	-	$	-
State		-		-
		-		-
Deferred:
Federal		839,000		397,000
State		81,000		39,000
		920,000		436,000
Income tax expense	$	920,000	$	436,000

The following table illustrates the difference between the statutory income tax rates applicable to the Company versus the effective tax expense rate for the years ended January 31, 2013 and 2012:

	2013			2012
Federal tax rate		34.0	%		34.0	%
Increase (decrease) in taxes resulting from:
State income taxes, net of federal tax benefit		3.4			4.1
Intrinsic costs warrants		-			2.1
Stock based compensation		0.4			5.2
Research and development tax credit		(11.4	)		5.9
Other - primarily non-deductible expenses		0.2			1.4
Effective tax rate		26.6	%		52.7	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at January 31, 2013 and 2012 were as follows:

	2013			2012
Current deferred tax assets:
Accounts receivable	$	150,000		$	133,000
Inventories		1,117,000			1,130,000
Compensation expense		169,000			187,000
Contract loss		(25,000	)		15,000
Other		64,000			84,000
Total current deferred tax assets		1,475,000			1,549,000
Non-current deferred tax assets:
Property, plant and equipment, principally due to differences in depreciation and capitalized interest		(843,000	)		(133,000	)
Building held for sale		62,000			70,000
Research and experimentation and alternative minimum tax credits		888,000			325,000
Stock-based compensation		-			-
Net operating loss carryforward		185,000			508,000
Total non-current deferred tax assets		292,000			770,000
Total deferred tax asset		1,767,000			2,319,000
Non-current deferred tax liabilities:
Identifiable intangibles		224,000			35,000
Net deferred tax asset	$	1,543,000		$	2,284,000

At January 31, 2013, the Company has a total net operating loss carryforward for U.S. Federal tax purposes of approximately $496,000 and research and development tax credits of $623,000 which expire in various years through 2029.

Realization of the Company’s net deferred tax asset is dependent upon the Company generating sufficient taxable income in future years to obtain a benefit from the reversal of deductible temporary differences and from tax loss carryforwards. The Company has concluded that, based on expected future results and the future reversals of existing taxable temporary differences, a reserve is not needed at January 31, 2013.

The Company records provisions dealing with uncertain tax positions as required in ASC740. As a result, the Company has recorded a liability of $0 at January 31, 2013 and 2012, of unrecognized tax benefits, inclusive of estimated accrued interest and penalties. At January 31, 2013, there was no accrued interest or accrued penalties related to uncertain tax positions.

The Company is generally no longer subject to examinations with respect to returns that have been filed for years prior to 2010.

The Company is not currently under examination by any taxing authority. We do not anticipate that the amount of the unrecognized benefit will significantly increase or decrease within the next twelve months.