9. INCOME TAXES

12 Months Ended

Apr. 30, 2013

Income Tax Disclosure [Abstract]

9. INCOME TAXES

9. INCOME TAXES

We are primarily subject to U.S. federal and California state jurisdictions. To our knowledge, all tax years remain open to examination by U.S. federal and state authorities.

In addition, in accordance with authoritative guidance, we are required to recognize the impact of an uncertain tax position in the consolidated financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. An uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained upon examination by the tax authorities. We had no unrecognized tax benefits from uncertain tax positions as of April 30, 2013 and 2012. It is also our policy, in accordance with authoritative guidance, to recognize interest and penalties related to income tax matters in interest and other expense in our consolidated statements of operations. We did not recognize interest or penalties related to income taxes for fiscal years ended April 30, 2013, 2012, and 2011, and we did not accrue for interest or penalties as of April 30, 2013 and 2012.

At April 30, 2013, we had total deferred tax assets of $114,839,000. Due to uncertainties surrounding our ability to generate future taxable income to realize these tax assets, a full valuation has been established to offset our total deferred tax assets. Additionally, the future utilization of our net operating loss carry forwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Section 382, as a result of ownership changes that may have occurred previously or that could occur in the future. During the fiscal year ended April 30, 2013, a Section 382 analysis was performed and it was determined that no change in ownership had occurred. As such, we have included in our deferred tax assets all of the net operating loss carry forwards and have recorded a corresponding increase to our valuation allowance.

At April 30, 2013, we had federal net operating loss carry forwards of approximately $266,174,000. The net operating loss carry forwards expire in fiscal years 2019 through 2033. We also have state net operating loss carry forwards of approximately $203,167,000 at April 30, 2013, which begin to expire in fiscal year 2014. Included in these tax loss carry forwards are share-based compensation deductions in the amount of $5,722,000 that, when fully utilized, reduce cash income taxes and will result in a financial statement income tax benefit. The future income tax benefit, if realized, will be recorded to additional paid-in capital.

The provision for income taxes consists of the following for the three years ended April 30,:

	2013			2012			2011
Provision for federal income taxes at statutory rate	$	(10,125,000	)	$	(14,321,000	)	$	(11,611,000	)
State income taxes, net of federal benefit		2,000			20,000			(406,000	)
Expiration and adjustment of loss carry forwards		(98,263,000	)		13,980,000			9,174,000
Change in valuation allowance		108,310,000			(95,000	)		2,294,000
Other, net		76,000			416,000			549,000
Income tax (expense) benefit	$	–		$	–		$	–

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Significant components of our deferred tax assets at April 30, are as follows:

	2013			2012
Share-based compensation	$	4,624,000		$	3,494,000
Deferred revenue		1,912,000			1,719,000
Depreciation and amortization		668,000			623,000
Accrued liabilities		1,677,000			693,000
Net operating losses		105,958,000			–
Total deferred tax assets		114,839,000			6,529,000
Less valuation allowance		(114,839,000	)		(6,529,000	)
Net deferred tax assets	$	–		$	–