7. Income Taxes

12 Months Ended

Mar. 31, 2013

Income Tax Disclosure [Text Block]

Income Tax Disclosure [Text Block]

7.                   Income Taxes

Income tax (benefit) provision:

	Fiscal Year Ended
	March 31,			March 31,
	2013			2012
Current:
Federal	$	-		$	-
State and local		3,911			3,500
Total current tax provision		3,911			3,500
Deferred:
Federal		(1,561,076)			(32,698	)
State and local		13,585			384,917
Total deferred tax (benefit) provision		(1,547,491	)		352,219
Total (benefit) provision	$	(1,543,580	)	$	355,719

The components of the Company’s deferred taxes at March 31, 2013 and 2012 are as follows:

	March 31,			March 31,
	2013			2012
Deferred tax assets:
Net operating loss carryforwards	$	3,086,000		$	1,761,000
Tax credits		279,000			239,000
Allowance for doubtful accounts		7,000			13,000
Reserve for inventory obsolescence		69,000			72,000
Inventory capitalization		183,000			92,000
Deferred payroll and accrued interest		-			16,000
Vacation accrual		95,000			96,000
Warranty reserve		100,000			97,000
Deferred revenues		2,000			9,000
Stock options		32,000			29,000
Non-compete agreement		14,000			17,000
Depreciation		(82,000	)		(154,000	)
Deferred tax asset		3,785,000			2,287,000
Less valuation allowance		1,000			50,000
Deferred tax asset, net	$	3,784,000		$	2,237,000
Deferred tax asset – current	$	1,238,000		$	1,289,000
Deferred tax asset – long-term		2,546,000			948,000
Total	$	3,784,000		$	2,237,000

The recognized deferred tax asset is based upon the expected utilization of its benefit from future taxable income. The Company has federal net operating loss (“NOL”) carryforwards of approximately $9,078,000 as of March 31, 2013, of which approximately $225,000 is subject to limitations under Section 382 of the Internal Revenue Code. These carryforward losses are available to offset future taxable income, and begin to expire in the year 2024. A valuation allowance has been recorded against certain NJ State NOL carryforwards, which total approximately $8,305,000 as of March 31, 2013, since management does not believe that the realization of these NOL’s is more likely than not. NJ NOL carryforwards expire in 7 years, and certain of these amounts begin to expire in 2013.

The foregoing amounts are management’s estimates and the actual results could differ from those estimates. Future profitability in this competitive industry depends on continually obtaining and fulfilling new profitable sales agreements and modifying products.  The inability to obtain new profitable contracts or the failure of the Company’s engineering development efforts could reduce estimates of future profitability, which could affect the Company’s ability to realize the deferred tax assets.

A reconciliation of the income tax (benefit) provision at the statutory Federal tax rate of 34% to the income tax (benefit) provision recognized in the financial statements is as follows:

	March 31,			March 31,
	2013			2012
Income tax (benefit) provision  – statutory rate	$	(1,467,491	)	$	145,088
Income tax expenses – state and local, net of federal benefit		3,500			256,355
Permanent items		(38,350	)		(82,578	)
Research credits		-			(18,057	)
True-up of prior years deferred taxes		(67,246	)		57,277
Change in state rate		85,945			-
Change in valuation allowance		(49,718	)
Other		(10,220	)		(2,366	)
Income tax (benefit) provision	$	(1,543,580	)	$	355,719