NOTE 8. Income Taxes

Income taxes for the three month period ended June 30, 2015 was computed using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management.

At June 30, 2015, the Company has an Alternative Minimum Tax Credit of approximately $518 and is available to reduce future federal taxes. In addition, the Company has a Research & Development tax credit carryforward at the federal and state level of $2,022 and $1,767 respectively that is available to reduce federal and state taxes. A valuation allowance of $1,543 exists relating to the state tax credits and other items, as it is management’s belief that it is more likely than not that a portion of these deferred assets are not realizable.

The Company performed a qualitative and quantitative analysis of the available federal and state research and development tax credit during fiscal 2015 in order to determine the amount of previously unclaimed credits. With the recognition of the benefit, the Company also recorded a liability relating to uncertain tax positions of $255. The research and development credit has expired under the Federal statutes and no income tax benefits have been recorded as of June 30, 2015. If and when such credits are enacted, (either retroactively or prospectively) the impact will be favorable on the Company’s effective tax rate. During the current quarter the State of New Jersey issued an information request for the details supporting the research and development credits claimed. The Company has provided support in connection with the credit, however no further correspondence has occurred and the Company believes that any outcome will not have a material impact on the condensed consolidated financial statements.

At June 30, 2015, the Company does not expect the liability for uncertain tax positions to change in the next twelve months. The entire amount would be a benefit to the tax expense in the period in which the liability is reduced.