Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Apr. 30, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

(6) Income Taxes

 

Income tax expense for the years ended April 30 consists of the following:

(In Thousands)

 

    2013     2012     2011  
Current:                  
Federal   $ -     $ -     $ -  
State     5,000       5,000       5,000  
      5,000       5,000       5,000  
                         
Deferred:                        
Federal     -       -       -  
State     -       -       -  
      -       -       -  
Total income tax expense   $ 5,000     $ 5,000     $ 5,000  

 

Income tax expense differs from “expected” tax expense (computed by applying the applicable U.S. statutory Federal income tax rate to earnings before income taxes) as follows:

(In Thousands)

 

    2013     2012     2011  
                         
Federal income tax at statutory rates   $ (1,459,000 )   $ (1,106,000 )   $ (1,574,000 )
State income taxes (net of Federal income tax benefit)     (249,000 )     (193,000 )     (319,000 )
                         
Other     52,000       (47,000 )     (259,000 )
                         
Total income tax expense (benefit) before provision for valuation allowance     (1,656,000 )     (1,346,000 )     (2,152,000 )
Changes in valuation allowance     1,661,000       1,351,000       2,157,000  
Total income tax expense   $ 5,000     $ 5,000     $ 5,000  

 

The tax effect of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

(in Thousands)

 

    2013     2012  
Deferred tax assets:            
Compensated absences and severance, principally due to accruals for financial reporting purposes   $ 150,000     $ 99,000  
Stock-based compensation expense     1,259,000       1,202,000  
Accounts receivable, principally due to allowance for doubtful accounts and sales returns     78,000       78,000  
Property and equipment, principally due to differences in depreciation     106,000       253,000  
Intangible assets     464,000       360,000  
Inventories     91,000       88,000  
Domestic net operating losses     9,089,000       7,491,000  
Software development costs     -       -  
Alternative minimum tax     438,000       438,000  
Other     61,000       66,000  
Deferred tax assets     11,736,000       10,075,000  
                 
Valuation allowance     (11,736,000 )     (10,075,000 )
                 
Net deferred tax assets   $ 0     $ 0  

 

The Company recorded a valuation allowance of $1,661,000 and $1,351,000 for the fiscal years ended April 30, 2013 and 2012, respectively. Management believes sufficient uncertainty exists regarding the realization of the deferred tax asset items and that a valuation allowance is required. Management considers projected future taxable income and tax planning strategies in making this assessment. The amount of deferred tax assets considered realizable could materially change in the future if estimates of future taxable income change.

 

The Company has Federal and State net operating loss carry-forwards of approximately $23,400,000 and $21,700,000 respectively. These can be used to offset future taxable income and expire between 2023 and 2033 for Federal tax purposes and 2016 and 2033 for State tax purposes.

 

The Company adopted FASB guidance for accounting for uncertainty in income taxes on May 1, 2008. The implementation of this guidance did not result in a material adjustment to the Company’s liability for unrecognized income tax benefits. At the time of adoption and as of April 30, 2013, the Company currently was not and is not engaged in an income tax examination by any tax authority. The Company recognizes interest and penalties on unpaid taxes in its income tax expense. No interest or penalties were recognized during the Company’s fiscal years ended April 30, 2013, 2012, or 2011. The Company files income tax returns in the United States and in various states. The Company’s significant tax jurisdictions are the U.S. Federal, New Jersey and Pennsylvania. The tax years subsequent to 2007 remain open to examination by the taxing authorities.