Note 9 - Income Taxes

12 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Text Block]

9. INCOME TAXES

A reconciliation of the provision (recovery) of income taxes to the statutory Federal income tax rate is as follows:

	2012			2011			2010
Income (Loss) Before Provision for Income Taxes	$	(783,966	)	$	(672,535	)	$	(949,496	)
Statutory rate		34	%		34	%		34	%
		(266,548	)		(228,662	)		(322,829	)
Permanent differences		2,500			2,500			32,700
Research and development credit - net		(8,500	)		(27,500	)		(18,500	)
Valuation allowance		274,600			255,600			310,500
Other		(2,052	)		(1,938	)		(1,871	)
	$	-		$	-		$	-

Deferred tax assets (liabilities) consist of the following:

	2012			2011
Current:
Inventories	$	295,300		$	244,300
Bad debts		3,400			3,400
Accrued liabilities		45,600			39,200
Prepaid expense		(11,500	)		(16,800	)
		332,800			270,100
Valuation allowance		(332,800	)		(270,100	)
Total current deferred income taxes		-			-
Noncurrent:
Depreciation and amortization		53,400			86,500
Research and development and other credit carryforwards		1,716,300			1,700,400
Net operating loss carryforward		1,934,200			1,709,000
Contribution carryforward		163,200			250,400
Directors stock option plan		36,800			32,900
		3,903,900			3,779,200
Valuation allowance		(3,903,900	)		(3,779,200	)
Total long-term deferred income taxes		-			-
Total	$	-		$	-

The Company did not incur any material impact to its financial condition or results of operations due to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The Company is subject to U.S federal jurisdiction income tax examinations for the tax years 2008 through 2010. In addition, the Company is subject to state and local income tax examinations for the tax years 2008 through 2010.

The Company has available a net operating loss carryforward of approximately $5,689,000 and a contribution carryforward of approximately $480,000. The net operating loss and research and development credit carryforwards will begin to expire in 2015.

Management recorded a valuation allowance on the entire balance of deferred tax assets at September 30, 2009 due to the continued losses during the past several years, the current economic uncertainties, the negative effects of the current economic crisis on all the Company's markets and concern that a more likely than not expiration of the Company's net operating loss and research and development credit carryforwards could occur before they can be used. Management recorded a valuation allowance in the amount of $255,600 on the fiscal year ended September 30, 2011 deferred taxes. In addition, management recorded a valuation allowance in the amount of$187,400on the current year deferred taxes.

The Company's ability to realize the entire benefit of its deferred tax assets requires that the Company achieve certain future earning levels prior to the expiration of its net operating loss and research and development credit carryforwards. Because of the uncertainties involved with this significant estimate, it is reasonably possible that the Company's estimate may change in the near term.