Income Taxes

12 Months Ended

Sep. 30, 2011

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 8 – Income Taxes

The Company’s income tax expense (benefit) for the years ended September 30, 2011 and 2010 are as follows:

	2011			2010
Current
Federal	$	215,100		$	1,423,575
State		79,000			404,036
Utilization of QTDP tax credits		-0-			(1,201,750	)
	$	294,100		$	625,861
Deferred
Federal		219,935			233,400
State		(78,800	)		70,400
		141,135			303,800
Prior Year (Over) Under Accrual		99,511			-0-
Income tax expense (benefit)	$	534,746		$	929,661

The reasons for the difference between total tax expense and the amount computed by applying the statutory

federal income tax rates to income before income taxes at September 30, 2011 and 2010 are as follows:

	FY 2011			2010
Taxes at statutory rates applied to income before income taxes	$	742,700		$	1,354,300
Increase (reduction) in tax resulting from:
Depreciation		(221,700	)		(22,600	)
Amortization		(103,000	)		(238,900	)
Accounts receivable		8,900			(1,300	)
Inventories		(16,000	)		(22,700	)
Vacation pay		(5,600	)		34,600
Deferred compensation		-0-			(3,700	)
Unfunded pension liability		16,300			-0-
Effect of permanent differences		(29,100	)		18,100
State income taxes(net of federal benefit)		57,404			301,261
Net benefit of QTDP tax credits		-0-			(793,200	)
Net benefit of tax credits		(150,918	)		-0-
Deferred income taxes		141,135			303,800
		440,122		$	929,661

Deferred income taxes (benefit) reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and the tax effects of net operating losses that are available to offset future taxable income.  Significant components of the Company’s deferred tax assets (liabilities) at September 30, 2011 and 2010 are as follows:

	FY 2011			2010
Deferred tax asset (liability)
Accounts receivable	$	52,700		$	44,600
Inventory		224,700			239,100
Unfunded pension liability		35,100			20,200
Vacation pay		105,500			110,500
State deferred taxes		56,400			20,900
Federal Credits		969,000			598,335
Intangible amortization		(560,300	)		-0-
Depreciation		(623,100	)		(449,000	)
Total	$	260,000		$	584,635

There are Research and Experimentation (“R&E”) tax credits available at both the state and local levels designed to encourage and reward companies for efforts in areas of research and experimentation.  The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, enacted on December 12, 2011, retroactively extended the Research and Experimentation Credits which had lapsed on December 31, 2009.  In June, 2011, the Company completed a study encompassing all business activities and contracts in these areas.  As a result, the Company claimed tax credits of approximately $409,000 on its federal and state income tax returns for the year ended September 30, 2010. The Company has also filed amended federal and state income tax returns for the year ended September 30, 2009 claiming tax credits of approximately $636,000.  Total prior year Research and Experimentation Tax Credits were approximately $1,045,000.  The Company estimates $500,000 in tax credits for the year ended September 30, 2011.

There are similar Research and Development (“R&D”) tax credits in the United Kingdom (“U.K.”) also designed to encourage innovation in areas of research and development.  In August, 2011, the Company completed a study of all relevant business activities undertaken at Hilger Crystals in the U.K.  As a result, the Company claimed R&D tax credits in the U.K. of approximately $202,000.

As of September 30, 2011 and 2010, the Company has no net operating loss carryforwards to offset future federal or state income taxes.  The Company does have a QTPD tax credit carryover to fiscal year 2011 of $20,646 for research and development costs incurred in 2010 (during the Company’s 2011 fiscal year.) In July 2010, the Company applied for the Qualifying Therapeutic Discovery Project tax credit (“QTDP”). The QTDP tax credit allows qualifying businesses to claim a credit for 50% of their qualified investment in qualifying projects for tax years 2011 and 2010.  The tax credit covers research and development costs from 2009 and 2010.  In October 2010, the Company received notification from the Internal Revenue Service that it was granted the credits of approximately $1,200,000.  

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates.  The Company’s tax filings for federal and state jurisdictions for the years from 2009 to 2011 are still subject to examination.