Income Taxes

12 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

Income Taxes

The income tax provision is based upon management’s review of the Company’s estimated annual income tax rate, including state taxes. The income tax provision for Fiscal 2012 and Fiscal 2011 consists of state minimum taxes currently payable.

The provision for income taxes from continuing operations is comprised of:

	Fiscal Year Ended
	September 30, 2012		October 2, 2011
Current federal	$	—	$	(43,900	)
Current state		3,200		6,500
Deferred federal		—		—
Deferred state		—		—
Provision (benefit) for income tax expense	$	3,200	$	(37,400	)

The provision (benefit) for income taxes from continuing operations differs from the amount computed by applying the statutory federal income tax rate to income (loss) before (provision) benefit for income taxes. The sources and tax effects of the differences are as follows:

	Fiscal Year Ended
	September 30, 2012			October 2, 2011
Income tax benefit at the federal statutory rate of 34%	$	(6,782,600	)	$	(4,977,300	)
State income tax provision, net of federal benefit		2,100			2,100
Non-cash charges		3,500			353,800
Other		15,800			(15,700	)
Valuation allowance changes affecting the provision for income taxes		6,764,400			4,599,700
	$	3,200		$	(37,400	)

The tax effect of significant temporary items comprising the Company’s deferred taxes as of September 30, 2012 and October 2, 2011, are as follows:

	September 30, 2012			October 2, 2011
Current deferred tax assets:
Reserves not currently deductible	$	625,500		$	523,900
Current deferred tax liabilities:
Valuation allowance		(625,500	)		(523,900	)
Net current deferred tax assets (liabilities)	$	—		$	—
Non-current deferred tax assets:
Operating loss carry forwards	$	20,724,500		$	11,567,800
Non-current deferred tax liabilities:
Valuation allowance		(20,724,500	)		(11,567,800	)
Net non-current deferred tax asset (liability)	$	—		$	—

As of September 30, 2012 the Company has federal and California net operating loss (“NOL”) carryover of $39,500,000 and $38,600,000, respectively.  As a result of the ownership change that occurred during the year ended September 27, 2009, the Company’s pre-September 27, 2009 NOLs are subject to annual IRC section 382 limitation of approximately $105,000 per annum. Various equity transactions have occurred since the ownership change in Fiscal 2009 that may have resulted in a subsequent section 382 limitation, which may further limit the use of the Company’s NOL’s.

Because realization of the tax benefit of deferred tax assets is uncertain, the Company has provided a 100% valuation allowance against such assets as of September 30, 2012 and October 2, 2011.

The Company has concluded that no additional accrual for taxes, penalty or interest is required for uncertain tax positions. Interest and penalties related to uncertain tax positions will be reflected in income tax expense.