INCOME TAXES

12 Months Ended

Mar. 31, 2012

INCOME TAXES

INCOME TAXES

NOTE 9 - INCOME TAXES

The Company accounts for income taxes under the provisions of FASB ASC 740, Income Taxes.  The following table reflects (loss) income from continuing operations by location, the (benefit) provision for income taxes and the effective tax rate for fiscal 2012 and 2011:

	2012			2011
U.S. operations	$	(3,554,842	)	$	4,275,869
Foreign operations	(37,482		)	—
(Loss) income from operations before tax	(3,592,324		)	4,275,869
Income tax (benefit) provision	(1,469,218		)	1,588,890
Net (Loss) income	$	(2,123,106	)	$	2,686,979
Effective tax rate	(41		)%	37		%

The (benefit) provision for income taxes consists of the following as of March 31:

Current	2012			2011
Federal	$	(1,072,138	)	$	1,435,673
State	—			311,934
Foreign	127,093			—
Total current	(945,045		)	1,747,607
Deferred
Federal	31,912			(126,060		)
State	(419,622		)	(32,657		)
Foreign	(136,463		)	—
Total deferred	(524,173		)	(158,717		)
Income tax (benefit) provision	$	(1,469,218	)	$	1,588,890

A reconciliation between income taxes computed at the federal statutory rate for fiscal years ended March 31, 2012 and 2011 to the effective income tax rates applied to the net income reported in the Consolidated Statements of Operations and Other Comprehensive (Loss) Income is presented as follows:

	2012		2011
Federal statutory income tax rate	(34	)%	34	%
State income tax, net of federal benefit	(13	)%	6	%
Deduction for domestic production	—	%	(3	)%
Change in valuation allowance	2	%	2	%
Stock based compensation	3	%	—	%
Other	1	%	(2	)%
Effective income tax rate	(41	)%	37	%

The following table summarizes the components of deferred income tax assets and liabilities are as follows:

	2012			2011
Current Deferred Tax Assets:
Compensation	$	311,003		$	284,748
Allowance for doubtful accounts	9,865			9,960
Loss on uncompleted contracts	350,058			132,285
Net operating loss and credit carry-forward	63,040			—
Interest rate swaps	148,120			—
Other liabilities not currently deductible	198,896			—
Valuation allowance	(60,774		)	—
Total Current Deferred Tax Asset	$	1,020,208		$	426,993
Noncurrent Deferred Tax Asset (Liability):
Share based compensation awards	302,201			158,203
Net operating loss carry-forward	956,921			526,009
Valuation allowance	(371,807		)	(160,799		)
Total Noncurrent Deferred Tax Assets	$	887,315		$	523,413
Accelerated depreciation	(769,310		)	(488,181		)
Net Noncurrent Deferred Tax Asset	$	57,232		$	35,232
Net Deferred Tax Asset	$	1,138,214		$	462,225

In assessing the recoverability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.  The Company has determined that it is more likely than not that certain future tax benefits may not be realized.  Accordingly, a valuation allowance has been recorded against deferred tax assets that are unlikely to be realized.  Realization of the remaining deferred tax assets will depend on the generation of sufficient taxable income in the appropriate jurisdiction, the reversal of deferred tax liabilities, tax planning strategies and other factors prior to the expiration date of the carryforwards.  A change in the estimates used to make this determination could require a reduction in deferred tax assets if they are no longer considered realizable.

The following table summarizes carryforwards of net operating losses and tax credits as of March 31, 2012

	Amount		Expiration
Federal net operating losses	$	1,549,543	2025
Federal alternative minimum tax credits	$	32,894	Indefinite
State net operating losses	$	7,500,156	2032

The Internal Revenue Code provides for a limitation on the annual use of net operating loss carryforwards following certain ownership changes that could limit the Company’s ability to utilize these carryforwards on a yearly basis. The Company experienced an ownership change in connection with the acquisition of Ranor. Accordingly, the Company’s ability to utilize the aforementioned carryforwards is limited. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes. Therefore, the Company may not be able to take full advantage of these carryforwards for Federal or state income tax purposes.

The following table provides a reconciliation of the Company’s unrecognized tax benefits as of March 31, 2012:

	2012
Unrecognized tax benefits at March 31, 2011	$	—
Increases (decreases) based on tax positions related to 2012	—
Increases (decreases) based on tax positions prior to 2012	16
Decreases from expiration of statute of limitations	—
Unrecognized tax benefits at March 31, 2012	$	16

The Company has recognized $1,104 in interest expense related to uncertain tax positions in the tax provision (benefit) on the Consolidated Statements of Operations. The Company has not accrued any penalties with respect to uncertain tax positions.

The Company files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. The Company’s foreign subsidiary files separate income tax returns in the foreign jurisdiction in which it is located.  Tax years 2008 and forward remain open for examination.  The Company recognizes interest and penalties accrued related to income tax liabilities in selling, general and administrative expense in its Consolidated Statements of Operations.