Note 4. Income Taxes

12 Months Ended

Mar. 31, 2012

Income Tax Disclosure [Text Block]

Note 4. Income Taxes

We account for income taxes in accordance with ASC 740 (Topic 740, Income Taxes). ASC 740 is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected tax consequences or events that have been recognized in our financial statements or tax returns. ASC Topic 740 also clarifies the accounting for uncertainty in income taxes recognized in the financial statements. This interpretation prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken, or expected to be taken, in a tax return. There were no significant matters determined to be unrecognized tax benefits taken or expected to be taken in a tax return that have been recorded in our consolidated financial statements for fiscal years 2012 and 2011.

Additionally, ASC Topic 740 provides guidance on the recognition of interest and penalties related to income taxes. There were no interest or penalties related to income taxes that have been accrued or recognized as of and for fiscal years 2012 and 2011. We have elected to treat interest and penalties, to the extent they arise, as a component of income taxes.
 

In fiscal years 2012 and 2011, we recorded an income tax provision of approximately $1 thousand and $9 thousand, respectively, for minimum state taxes.

The reconciliation of the effective income tax rate to the federal statutory rate is as follows:

	Fiscal Year Ended March 31,
	2012			2011
Federal statutory rate		-34	%		-34	%
State taxes, net of federal tax benefit		3	%		1	%
Permanent differences:
Incentive stock options		2	%		2	%
Effect of permanent differences		2	%		2	%
Increase in valuation allowance		29	%		31	%
Effective tax rate		--	%		--	%

As of March 31, 2012, we had approximately $59.3 million of federal net operating loss carryforwards in the U.S. These net operating loss carryforwards expire at various dates through our fiscal 2032, commencing in fiscal 2013. As of March 31, 2012, we had approximately $40.4 million of state net operating loss carryforwards in the U.S. These net operating loss carryforwards expire at various dates through our fiscal 2027, commencing in fiscal 2013. At March 31, 2012, we had approximately $1.0 million of capital loss carryforwards available to offset future capital gains. These capital loss carryforwards expire at various dates through our fiscal 2015, commencing in fiscal 2013. The Internal Revenue Code (“IRC”) limits the amounts of net operating loss carryforwards that a company may use in any one year in the event of certain cumulative changes in ownership over a three-year period as described in Section 382 of the IRC. We have not performed a detailed analysis to determine whether an ownership change has occurred. Such a change of ownership would limit our utilization of the net operating losses, and could be triggered by subsequent sales of securities by us or our stockholders.

The tax effects of the major items recorded as deferred tax assets are as follows:

	March 31,
	2012			2011
Net operating loss carryforwards	$	21,942		$	21,278
Stock-based compensation		2,595			2,351
Depreciation and amortization		137			(129	)
Nondeductible reserves		270			421
Capital loss carryforwards		373			389
Deferred debt cost		199			66
Other		312			320
Gross deferred tax asset		25,828			24,696
Valuation allowance		(25,828	)		(24,696	)
Net deferred tax asset	$	-		$	-

The ending balances of the deferred tax asset have been fully reserved, reflecting the uncertainties as to realizability evidenced by our historical results and restrictions on the usage of the net operating loss carryforwards.

We file tax returns in the U.S. federal jurisdiction and various states. We are no longer subject to U.S. federal tax examinations for years before our fiscal 2008 with exception of the net operating losses, for which the statute of limitations will expire the earlier of three years after the utilization or when expired. State jurisdictions that remain subject to examination range from our fiscal year 2008 to 2011.