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Note 4 - Income Taxes | 12 Months Ended
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Sep. 30, 2011
Income Tax Disclosure [Text Block] | 4. Income Taxes: The components of income (loss) before income tax and income tax expense (benefit) are comprised of the following:
|  | Years Ended September 30, |
|  | 2011 |  |  | 2010 |
|  | (Amounts in thousands) |
Income (loss) before income tax: |  |  |  |  |  |
U.S. |  | $ | 501 |  |  | $ | 1,448 |
Foreign |  |  | 214 |  |  |  | (299 | )
|  | $ | 715 |  |  | $ | 1,149 |
Income tax expense (benefit): |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | 157 |  |  | $ | 410 |
State |  |  | 39 |  |  |  | 51 |
Foreign |  |  | (12 | ) |  |  | (158 | )
|  |  | 184 |  |  |  | 303 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | (16 | ) |  |  | (59 | )
State |  |  | 19 |  |  |  | (9 | )
Foreign |  |  | 159 |  |  |  | -- |
|  |  | 162 |  |  |  | (68 | )
|  | $ | 346 |  |  | $ | 235 |
Reconciliation of “expected” income tax expense (benefit) to “actual” income tax expense (benefit) is as follows:
|  | Years Ended September 30, |
|  | 2011 |  |  | 2010 |
|  | (Dollar amounts in thousands) |
Computed “expected” tax expense |  | $ | 243 |  |  |  | 34.0 | % |  | $ | 391 |  |  |  | 34.0 | %
Increases (reductions) in taxes resulting from: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
State income taxes, net of federal tax benefit |  |  | 38 |  |  |  | 5.2 | % |  |  | 28 |  |  |  | 2.4 | %
Foreign operations |  |  | (85 | ) |  |  | (11.9 | )% |  |  | (57 | ) |  |  | (5.0 | )%
Change in valuation allowance |  |  | (46 | ) |  |  | (6.4 | )% |  |  | 70 |  |  |  | 6.1 | %
Permanent differences |  |  | 8 |  |  |  | 1.1 | % |  |  | 4 |  |  |  | 0.4 | %
Stock-based compensation |  |  | 11 |  |  |  | 1.6 | % |  |  | 34 |  |  |  | 3.0 | %
Foreign net operating loss |  |  | 163 |  |  |  | 22.8 | % |  |  | -- |  |  |  | -- |
Uncertain tax liability adjustment |  |  | 14 |  |  |  | 2.0 | % |  |  | (320 | ) |  |  | (27.8 | )%
Tax refund adjustment |  |  | -- |  |  |  | -- |  |  |  | 79 |  |  |  | 6.9 | %
Other items |  |  | -- |  |  |  | -- . |  |  |  | 6 |  |  |  | 0.5 | %
Income tax expense |  | $ | 346 |  |  |  | 48.4 | % |  | $ | 235 |  |  |  | 20.5 | %
The Company recorded a consolidated income tax expense of $346 thousand in fiscal year 2011 reflecting an effective tax rate of 48.4% compared to a tax expense of $235 thousand in fiscal year 2010 with an effective tax rate of 20.5%. We utilized approximately $142 thousand of our net operating loss carryovers which were applied against our 2010 U.S. taxable income. For the years ended September 30, 2011 and 2010, temporary differences, which give rise to deferred tax assets (liabilities), are as follows:
|  | September 30, 2011 |  |  | September 30, 2010 |
|  | (Amounts in thousands) |
Deferred tax assets: |  |  |  |  |  |
Pension |  | $ | 2,142 |  |  | $ | 2,502 |
Goodwill |  |  | 821 |  |  |  | 954 |
Other reserves and accruals |  |  | 483 |  |  |  | 409 |
Inventory reserves and other |  |  | 566 |  |  |  | 618 |
State credits, net of federal benefit |  |  | 86 |  |  |  | 485 |
Federal and state net operating loss carryforwards |  |  | 54 |  |  |  | 132 |
Foreign net operating loss carryforwards |  |  | 1,898 |  |  |  | 2,874 |
Foreign tax credits |  |  | 7 |  |  |  | 7 |
Depreciation and amortization |  |  | 111 |  |  |  | 228 |
Gross deferred tax assets |  |  | 6,168 |  |  |  | 8,209 |
Less: valuation allowance |  |  | (5,347 | ) |  |  | (7,205 | )
Realizable deferred tax asset |  |  | 821 |  |  |  | 1,004 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Pension |  |  | — |  |  |  | — |
Reserves |  |  | — |  |  |  | — |
Gross deferred tax liabilities |  |  | — |  |  |  | — |
Net deferred tax assets |  | $ | 821 |  |  | $ | 1,004 |
The deferred tax valuation allowance decreased by $1.9 million, from $7.2 million at September 30, 2010, to $5.3 million at September 30, 2011. In assessing the realizability of deferred tax assets, the Company considers its taxable future earnings and the expected timing of the reversal of temporary differences. Accordingly, the Company has recorded a valuation allowance which reduces the gross deferred tax asset to an amount which management believes will more likely than not be realized. The valuation allowance was determined, by assessing both positive and negative evidence, whether it is more likely than not that deferred tax assets are realizable. Such assessment is done on a jurisdiction-by-jurisdiction basis. The Company’s inability to project future profitability beyond fiscal year 2013 in the U.S. and the cumulative losses incurred in recent years in the U.K. represent sufficient negative evidence to record a valuation allowance against certain deferred tax assets. As of September 30, 2011 and 2010, the Company had U.S. net operating loss carryforwards for state tax purposes of approximately $ 1.5 million and $1.9 million, respectively which are available to offset future taxable income through 2029. As of September 30, 2011, the Company had U.K. net operating loss carryforwards of approximately $8.8 million that have an indefinite life with no expiration. Undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $3.0 million and $3.7 million at September 30, 2011and 2010, respectively. The Company’s policy is that its undistributed foreign earnings are indefinitely reinvested and, accordingly, no U.S. federal and state deferred tax liabilities have been recorded. In addition, the calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations in a multitude of jurisdictions. The Company records liabilities for estimated tax obligations in the U.S. and other tax jurisdictions. These estimated tax liabilities include the provision for taxes that may become payable in the future. As of September 30, 2011, the total amount of uncertain tax liabilities was $0.5 million all of which would affect our effective tax rate if recognized. We do not expect any of these uncertain tax liabilities to reverse in the next twelve months. We recognize interest and potential penalties accrued related to unrecognized tax benefits in our provision for income taxes. A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
|  | Year Ended September 30, 2011 |  |  | Year Ended September 30, 2010 |
|  | (Amounts in thousands) |
Balance, beginning of year |  | $ | — |  |  | $ | 320 |
Increases in tax positions in the current year |  |  | 458 |  |  |  | — |
Settlements |  |  | — |  |  |  | — |
Accrued penalties and interest |  |  | 14 |  |  |  | 14 |
Decrease in current and prior year tax positions |  |  | — |  |  |  | (334 | )
Balance, end of year |  | $ | 472 |  |  | $ | — |
We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company has reviewed the tax positions taken on returns filed domestically and in its foreign jurisdictions for all open years, generally 2008 through 2011, and believes that tax adjustments in any audited year will not be material.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 + Details
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