4. INCOME TAXES

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

	Years Ended April 30,
	2014		2013

Current:
Federal	$	100	$	5
State		127		3
		227		8
Deferred:
Federal		1,327		(1,327	)
State		228		(228	)
Total	$	1,782	$	(1,547	)

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

	Years Ended April 30,
	2014		2013
(Amounts in thousands)
Expected federal income tax provision	$	1,658	$	528
State taxes, net of federal benefit		31		2
Permanent differences		12		11
Change in valuation allowance		71		(2,088	)
Other		10		-
	$	1,782	$	(1,547	)

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, 2014 and 2013, the Company had net deferred tax assets of $5.1 million and $6.8 million, respectively, primarily attributable to its net operating loss carryforwards as further described below. At April 30, 2014, the Company has provided a valuation allowance against the entire balance of its net deferred tax assets due to the uncertainty regarding realization. As of April 30, 2013, the Company recorded a valuation allowance against the portion of its deferred tax assets that are more likely than not to be realized.

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

	April 30,			April 30,
(Amounts in thousands)	2014			2013
Deferred tax assets:
Net operating loss, general business credit and AMT carryforwards	$	3,767		$	5,531
Deferred revenue		85			85
Reserves and accruals		1,142			1,188
Other		95			-
		5,089			6,804
Deferred tax liabilities:
Other		(26	)		(52	)
Net deferred tax assets before valuation allowance		5,063			6,752
Valuation allowance		(5,063	)		(5,197	)
Net deferred taxes	$	-		$	1,555

As of April 30, 2014, the Company has approximately $9.5 million in federal net operating loss carryforwards that will begin to expire in 2020, unless previously utilized. In addition, as of April 30, 2014, the Company has approximately $284,000 in federal research and development credit carryforwards that begin to expire in 2020. The Company also has approximately $237,000 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, 2010. 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, 2014 and 2013.