Income Tax Expense

9 Months Ended

Dec. 31, 2011

Income Tax Expense [Abstract]

Income Tax Expense

15. Income Tax Expense

As of March 31, 2011, we have generated U.S. net operating loss (NOL) carryforwards of approximately $27 million for U.S. income tax purposes, which expire in 2012 through 2031, and NOLs in the U.K. of approximately $174,000, which we can carry forward indefinitely.  U.S. NOL carryforwards cannot be used to offset taxable income in foreign jurisdictions.

In addition, future utilization of U.S. NOL carryforwards is subject to certain limitations under Section 382 of the Internal Revenue Code.  This section generally relates to a 50 percent change in ownership of a company over a three-year period.  We believe that the issuance of our common stock in the December 2006 public offering resulted in an “ownership change” under Section 382.  Accordingly, our ability to use NOL tax attributes generated prior to December 2006 is limited to approximately $750,000 per year.  We also believe that the issuance of our common stock in the July 2010 public offering resulted in an additional "ownership change" under Section 382.  Accordingly, our ability to use NOL tax attributes generated after December 2006 and prior to July 2010 is limited to approximately $2,350,000 per year.

We provide for a valuation allowance when it is more likely than not that we will not realize a portion of the deferred tax assets.  We have established a valuation allowance for all U.S. and certain foreign deferred tax assets due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets.

During both the three months ended December 31, 2011 and 2010, we recorded income tax expense of $9,000.  During the nine months ended December 31, 2011 and 2010, we recorded income tax expense of $32,000 and $28,000, respectively.  Income tax expense is attributed to our Netherlands subsidiary and U.S. State minimum taxes.

On December 31, 2011, we had a deferred tax asset of $84,000 attributed to our Netherlands subsidiary.  We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between the financial carrying amounts of existing assets and liabilities and their respective tax bases.  We measure deferred tax assets and liabilities using enacted tax rates we expect to apply to taxable income in the years in which we expect to recover or settle those temporary differences.

It is management's responsibility to determine whether it is “more-likely-than-not” that a taxing authority will sustain a tax position upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position.  We have reviewed all income tax positions taken or that we expect to take for all open tax years and determined that our income tax positions are appropriately stated and supported for all open years.  Accordingly, we have no reserve for uncertain tax positions recorded in our consolidated financial statements.

Under our accounting policies, we recognize interest and penalties accrued on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense.

The tax returns for fiscal years ended March 31, 2009 through March 31, 2011 remain open to examination by the Internal Revenue Service and tax returns for fiscal years ended March 31, 2008 through March 31, 2011 remain open to examination by various state taxing jurisdictions to which we are subject.  In addition, we are subject to examination by certain foreign taxing authorities for which the fiscal years 2009 through 2011 remain open for examination