4. INCOME TAXES

The (benefit) provision for income taxes is as follows (in thousands):

	Years Ended April 30,
	2013			2012

Current:
Federal	$	5		$	22
State		3			3
		8			25
Deferred:
Federal		(1,327	)		-
State		(228	)		-
Total	$	(1,547	)	$	25

The following is a reconciliation of the expected income tax benefit or provision at the statutory federal income tax rate for the actual provision or benefit:

	Years Ended April 30,
	2013			2012
(Amounts in thousands)
Expected federal income tax provision	$	528		$	428
State taxes, net of federal benefit		2			2
Permanent differences		11			10
Change in valuation allowance		(2,088	)		(6,218	)
Net operating loss carryover expiration		-			5,804
Other		-			(1	)
	$	(1,547	)	$	25

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes. As of April 30, 2013 and 2012, the Company had net deferred tax assets of $6.8 million and $8.6 million, respectively, primarily attributable to its net operating loss carryforwards as further described below. At April 30, 2013, the Company has provided a valuation allowance against the portion of its deferred tax assets that are more likely than not to be realized. Due to the signed sales contracts, the Company anticipates realizing a portion of its deferred tax assets. As of April 30, 2012, the Company recorded a valuation allowance against the entire balance of its deferred tax assets due to the uncertainty regarding realization at that time. The $1.8 million decrease in the deferred tax assets in 2013 was due to changes in the inventory reserve balance and due to the effects of the utilization of federal net operating loss carryforwards.

Significant components of the Company's deferred tax assets are as follows:

	April 30,			April 30,
(Amounts in thousands)	2013			2012
Deferred tax assets:
Net operating loss, general business credit and AMT carryforwards	$	5,531		$	7,054
Deferred revenue		85			84
Reserves and accruals		1,188			1,445
		6,804			8,583
Deferred tax liabilities:
Other		(52	)		(24	)
Net deferred tax assets before valuation allowance		6,752			8,559
Valuation allowance		(5,197	)		(8,559	)
Net deferred taxes	$	1,555		$	-

As of April 30, 2013, the Company has approximately $14.5 million in federal net operating loss carryforwards that will begin to expire in 2018, unless previously utilized. Additionally, as of April 30, 2013, the Company has approximately $1.6 million in California net operating loss carryforwards that will begin to expire in 2029, unless previously utilized. In addition, as of April 30, 2013, the Company has approximately $284,000 in federal research and development credit carryforwards that begin to expire in 2020, and $158,000 of California research and development credit carryforwards that can be carried forward indefinitely. The Company also has approximately $137,000 in federal alternative minimum tax credits that can be carried forward indefinitely.

Pursuant to the Tax Reform Act of 1986, Internal Revenue Code Section 382, utilization of the Company's federal credit and net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within any three-year period.

The Company and its subsidiaries are subject to federal income tax as well as income tax from state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to April 30, 2009. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.

The Company recognizes interest and penalties as a component of income tax expense. There were no interest and penalties for the years ended April 30, 2013 and 2012.