Note 14 Income Taxes

Income tax benefit (expense) for the years ended March 31, 2013, 2012 and 2011 consisted of:

	2013			2012			2011
	(in thousands)
Current:
Federal	$	(53	)	$	(66	)	$	17
State	(21		)	(47		)	(2		)
Total current	(74		)	(113		)	15
Deferred:
Federal	1,894			859			492
State	201			33			60
Total deferred	2,095			892			552
Income tax benefit (expense)	$	2,021		$	779		$	567

The following table reconciles the amount of income taxes computed at the federal statutory rate of 34%, for all periods presented, to the amount reflected in the Company’s consolidated statements of operations for the years ended March 31, 2013, 2012 and 2011:

	2013			2012			2011
	(in thousands)
Tax provision at federal statutory income tax rate	$	(744	)	$	(970	)	$	(395	)
State income taxes benefit (expense), net of federal income tax effect	(130		)	(68		)	38
Decrease in valuation allowance for utilization of deferred tax assets	1,082			1,100			357
Reduction in valuation allowance	1,912			892			552
Stock based compensation	(201		)	(97		)	16
Other, net	102			(78		)	(1		)
Income tax benefit (expense)	$	2,021		$	779		$	567

The tax effects of temporary differences related to various assets, liabilities and carry forwards that give rise to deferred tax assets and deferred tax liabilities as of March 31, 2013 and 2012 are as follows:

	2013			2012
	(in thousands)
Deferred tax assets:
Net operating loss carry forwards	$	3,674		$	4,546
Compensation accrual	134			322
Inventory differences	14			41
Tax credit carry forwards	156			115
Other	12			11
Gross deferred tax assets	3,990			5,035
Less valuation allowance	—			(2,994		)
Net deferred tax assets	3,990			2,041
Deferred tax liability: Depreciation and amortization	(451		)	(597		)
Net deferred tax assets	$	3,539		$	1,444

In assessing the valuation allowance for deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. As of March 31, 2012 and 2011 management had reduced the valuation allowance against deferred tax assets based on a review of historical taxable income and future expectations. As of March 31, 2013, based upon several years of historical taxable income and expectations for future taxable income over the periods in which net deferred tax assets are deductible, management believes it is more likely than not the Company will realize its gross deferred tax assets before they expire and therefore the remaining balance of the valuation allowance was reversed. The amount of the deferred tax assets considered realizable, however, could change if estimates of future taxable income during the carry forward period change.

At March 31, 2013, the Company has net operating loss carry forwards and tax credit carry forwards available to offset future federal income tax as follows (in thousands):

Expires March 31,	Net Operating Losses		Research and Experimentation Tax Credits
2020	0		7
2021	126		2
2022	3,161		—
2023	1,864		1
2026	159		—
2027	2,665		1
2028	1,612		—
2031	389		—
	$	9,976	$	11

In addition, at March 31, 2013, the Company has alternative minimum tax credit carry forwards of approximately $146,000 available to reduce future federal regular income taxes over an indefinite period.

At March 31, 2013, the Company has state tax net operating loss carry forwards available to offset future Hawaii state taxable income of $6,070,000. These carry forwards expire March 31, 2016 through 2031.

The following represents the open tax years and jurisdictions that the Company used in its evaluation of tax positions:

Open tax years ending March 31,		Jurisdiction
2010 - 2013		U.S. federal
2010 - 2013		State of Hawaii
2009 - 2013		State of California