Income Taxes

12 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 10 – Income Taxes

Income (loss) before the provision (benefit) for income taxes consists of the following: 

	2012			2011
US	$	(4,014,238	)	$	2,184,381
Foreign		(330,549	)		(539,538	)
Total	$	(4,344,787	)	$	1,644,843

The provision (benefit) for income taxes in the accompanying consolidated financial statements consists of the following:

	2012			2011
Current
Federal	$	(374,432	)	$	215,128
State		112,024			172,883
Foreign		65,318			(223,284	)
	$	(197,090	)	$	164,727
Deferred
Federal		200,313			176,535
State		59,351			(35,400	)
Foreign		(103,598	)		(12,664	)
		156,066			128,471
Income tax expense (benefit)	$	(41,024	)	$	293,198

A reconciliation of the federal statutory rate to the Company's effective tax rate is as follows:

	2012			2011
Tax due at statutory rate		34.00	%		34.00	%
State tax provision, net of federal		5.22	%		7.79	%
Valuation allowance		-35.98	%		0.00	%
Permanent differences		-0.86	%		-1.77	%
Tax credits generated		0.50	%		-24.83	%
Foreign rate differential and other		-1.93	%		2.62	%
Total		0.95	%		17.81	%

The Company’s effective tax rate differs from the federal, statutory rate in 2012 primarily due to a full valuation allowance on the U.S. deferred tax assets recorded during the year. The Company’s effective tax rate differs from the statutory rate in 2011 primarily due to benefits recorded for federal and state research and experimentation credits generated from a multiple year study completed during the year. The tax rate benefit related to research and experimentation credits is lower in 2012 mainly due to the fact that 2011 reflects credits from multiple years and from the federal research and experimentation credit law not being extended as of September 30, 2012.

Net deferred tax assets (liabilities) consisted of the following at September 30, 2012:

	Domestic			Foreign			Worldwide
Credits		1,362,543			-			1,362,543
NOLs		170,522			41,868			212,390
Stock compensation		170,362			-			170,362
Accruals		497,335			-			497,335
Intangibles		73,681			-			73,681
Other		205,154			-			205,154
Gross deferred tax assets		2,479,597			41,868			2,521,465
Valuation allowance		(1,700,949	)		-			(1,700,949	)
Deferred tax assets, net		778,648			41,868			820,516
Depreciation		(778,648	)		(65,948	)		(844,596	)
Intangibles		-			(220,989	)		(220,989	)
Gross deferred tax liabilities		(778,648	)		(286,937	)		(1,065,585	)
Net deferred tax asset (liability)		-			(245,069	)		(245,069	)

Net deferred tax assets (liabilities) consisted of the following at September 30, 2011:

	Domestic			Foreign			Worldwide
Credits		969,000			-			969,000
NOLs		-			-			-
Stock compensation		-			45,752			45,752
Accruals		193,300			-			193,300
Intangibles		-			-			-
Other		280,764			-			280,764
Gross deferred tax assets		1,443,064			45,752			1,488,816
Valuation allowance		-			-			-
Deferred tax assets, net		1,443,064			45,752			1,488,816
Depreciation		(623,100	)		(110,452	)		(733,552	)
Intangibles		(560,300	)		(283,967	)		(844,267	)
Gross deferred tax liabilities		(1,183,400	)		(394,419	)		(1,577,819	)
Net deferred tax asset (liability)		259,664			(348,667	)		(89,003	)

In assessing the ability to realize the net deferred tax assets, management considers various factors including taxable income in carryback years, future reversals of existing taxable temporary differences, tax planning strategies and projections of future taxable income, to determine whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Based upon the Company’s current losses and uncertainty of future profits, the Company has determined that the uncertainty regarding the realization of these assets is sufficient to warrant the need for a full valuation allowance against its U.S. net deferred tax assets.

As of September 30, 2012 and 2011, the Company has no federal net operating losses. As of September 30, 2012 and 2011 the Company has state net operating losses of $2,764,000 and $863,000, respectively. The state net operating losses begin expiring in 2031. At September 30, 2012 and 2011, the Company has foreign net operating loss carryforwards of approximately $182,000 which can be carried forward indefinitely.

As of September 30, 2012 and 2011, the Company has federal research credits of $1,203,000 and $1,000,000, respectively. The federal credits begin expiring in fiscal year 2028. As of September 30, 2012 and 2011, the Company has state research credits of $197,000 and $212,000, respectively. The state credits begin expiring in fiscal year 2023.

As of September 30, 2012 and 2011, the Company has no unrecorded liabilities for uncertain tax positions. Interest and penalty charges, if any, related to uncertain tax positions would be classified as income tax expense in the accompanying consolidated statement of operations. As of September 30, 2012 and 2011, the Company has no accrued interest or penalties related to uncertain tax positions.

The Company is subject to taxation in the United States and the United Kingdom. At September 30, 2012, domestic tax years from fiscal 2009 through fiscal 2012 remain open to examination by the taxing authorities and tax years 2011 and 2012 remain open in the United Kingdom.