Income Taxes

3 Months Ended

Dec. 31, 2012

Income Taxes

Income Taxes

Note F — Income Taxes

On a quarterly basis, the Company evaluates the realizability of its deferred tax assets and assesses the requirements for a valuation allowance. As of December 31, 2012 and September 30, 2012, the Company has a valuation allowance of $216,000 of which $42,000 is related to Minnesota R&D credit carryovers and $174,000 pertains to U.S. federal capital loss carryovers as the Company believes it is more likely than not that the deferred tax asset will not be utilized in future years. For the quarter ended December 31, 2012, the Company had an effective worldwide income tax rate of approximately 27%. The effective tax rate on worldwide income may fluctuate depending upon inter-company eliminations, profitability of foreign operations, and any discrete items.

As of December 31, 2012, the Company has recognized approximately $43,000 for unrecognized tax benefits, which has not changed from the prior quarter. If the Company were to prevail on all unrecognized tax benefits recorded at December 31, 2012, the total gross unrecognized tax benefit of approximately $43,000 would benefit the Company’s effective tax rate.