Note 7 - Income Taxes

3 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

Note 7 - Income Taxes

Because the Company only had financial results for New Dawn from December 5 through December 31, 2012, it cannot estimate the pretax income (loss) for the full fiscal year; consequently, the actual effective tax rate was used to calculate the tax provision for the quarter ended December 31, 2012.

On a pretax profit of $1,264,000 and $2,586,000 for the three months ended December 31, 2012 and 2011, respectively, the Company recorded a tax provision of $430,000 and $880,000 respectively, which was lower in each case than the amount computed using the statutory rate because of the available dividends received deduction and the domestic production activity deduction.  Consequently, the Company’s effective tax rate was 34% for both the three months ended December 31, 2012 and 2011.  The acquisition of New Dawn was structured as a stock acquisition with an Internal Revenue Code Section 338 (h)(10) election, which  results in the acquisition being treated similarly to an acquisition of assets for income tax purposes. As such, the amounts allocated to purchased software and customer relationships as well as goodwill are amortized over a 15-year period on a straight-line basis for tax purposes. Differences in the amortization period and methods between book and tax useful lives will result in deferred tax assets or liabilities.The Company files federal income tax returns in the United States and with various state jurisdictions and is no longer subject to examinations for years before 2010 with regard to federal income taxes.