Note 12 - Income Taxes

3 Months Ended

Mar. 31, 2012

Income Tax Disclosure [Text Block]

12.  INCOME TAXES

The provision for income taxes is as follows:

	Year Ended March 31,
	2012		2011
Current:
Federal	$	195,000	$	1,221,000
State		41,000		127,000
Foreign		105,000		78,000
Total current		341,000		1,426,000
Deferred:
Federal		347,000		4,000
State		58,000		1,000
Total deferred		405,000		5,000
Total	$	746,000	$	1,431,000

The income tax provision was different from the amount computed using the statutory Federal income tax rate for the following reasons:

	Year Ended March 31,
	2012					2011
Income tax provision at U.S. statutory rate	$	713,000		34.0	%	$	1,213,000		34.0	%
State income taxes, net of Federal benefit		60,000		2.9			118,000		3.3
Production deduction		-		-			(78,000	)	(2.2	)
Permanent differences, other		32,000		1.5			11,000		0.3
Puerto Rico tax effect		-		-			-		-
Other differences, net		(59,000	)	(2.8	)		167,000		4.7
Income tax provision	$	746,000		35.6	%	$	1,431,000		40.1	%

	Year Ended March 31,
	2012					2011
Income tax provision at U.S. statutory rate	$	713,000		34.0	%	$	1,213,000		34.0	%
State income taxes, net of Federal benefit		60,000		2.9			118,000		3.3
Production deduction		-		-			(78,000	)	(2.2	)
Permanent differences, other		32,000		1.5			11,000		0.3
Puerto Rico tax effect		-		-			-		-
Other differences, net		(59,000	)	(2.8	)		167,000		4.7
Income tax provision	$	746,000		35.6	%	$	1,431,000		40.1	%

The other differences, net in the prior year ended March 31, 2011 includes an adjustment for an over statement of Puerto Rico tax credits and other accumulated items in prior periods.  The effect of the adjustment is not material to the current or any prior periods.

Deferred tax assets and liabilities consisted of the following:

	March 31,
	2012			2011
Stock option compensation	$	353,000		$	419,000
Inventory reserves		290,000			227,000
Accrued vacation		202,000			182,000
Warranty reserve		95,000			61,000
Accounts receivable reserve		108,000			83,000
Other		21,000			32,000
Gross deferred tax assets		1,069,000			1,004,000
Prepaid expenses		(286,000	)		(166,000	)
Property and equipment		(417,000	)		(67,000	)
Gross deferred tax liabilities		(703,000	)		(233,000	)
Net deferred tax asset	$	366,000		$	771,000

The deferred tax items are reported on a net current and non-current basis in the accompanying fiscal 2012 and 2011 consolidated balance sheets according to the classification of the related asset and liability.

The Company accounts for uncertain tax positions in accordance with accounting principles generally accepted in the United States of America.  The Company has analyzed filing positions in all of the federal, state and international jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.  The periods subject to examination for the Company’s federal and state returns are the fiscal 2008 through 2011 tax years.  As of March 31, 2012 and 2011, the Company did not have any unrecognized tax benefits.

It is the Company’s policy to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.  As of March 31, 2012 and 2011, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, nor was any interest expense recognized during the years ended March 31, 2012 and 2011.