5.	Income Taxes

The unaudited provision for income taxes for the three months ended October 31, 2012 and 2011 is composed of the following (in thousands):


	2012		2011
Current:
Federal	$	-	$	-
State		(22)		(18)
Deferred, net		(104)		(150)
Income tax benefit (expense)	$	(126)	$	(168)

The provision for income taxes is based on taxes payable under currently enacted tax laws and an analysis of temporary differences between the book and tax bases of the Company’s assets and liabilities, including various accruals, allowances, depreciation and amortization, and does not represent current taxes due. The tax effect of these temporary differences and the estimated benefit from tax net operating losses are reported as deferred tax assets and liabilities in the balance sheet. We have unused net operating loss carry forwards for federal income tax purposes, and as a result, we generally only incur alternative minimum taxes at the federal level.

As of October 31, 2012, the Company had accumulated net operating loss carryforwards for federal and state tax purposes of approximately $10,582,000 and $5,660,000, respectively, which expire as follows:


Year ended July 31, *	Federal		State
2013 Ɨ	$	2,746	$	1,841
2014		-		482
2015		-		3,258
2019		843		4
2020		6,043		-
2024		4		-
2025		-		75
2030		946		-
	$	10,582	$	5,660

* Years not shown have no amounts that expire.

Ɨ Was not reduced for current year estimated usage as it has not yet transpired.

An assessment is performed semi-annually of the likelihood that our net deferred tax assets will be realized from future taxable income. To the extent management believes it is more likely than not that some portion, or all, of the deferred tax asset will not be realized, a valuation allowance is established. This assessment is based on all available evidence, both positive and negative, in evaluating the likelihood of realizability. Issues considered in the assessment include future reversals of existing taxable temporary differences, estimates of future taxable income (exclusive of reversing temporary differences and carryforwards) and prudent tax planning strategies available in future periods. Because the ultimate realizability of deferred tax assets is highly subject to the outcome of future events, the amount established as a valuation allowance is considered to be a significant estimate that is subject to change in the near term. To the extent a valuation allowance is established or there is a change in the allowance during a period, the change is reflected with a corresponding increase or decrease in the tax provision in the Consolidated Statements of Income. We will continue to evaluate the realizability of our deferred tax assets on a semi-annual basis. There were no assessments made to evaluate the realizability of our deferred tax assets during the quarters ended October 31, 2012 and 2011.