XML 33 R19.htm IDEA: XBRL DOCUMENT v2.4.0.6
Income Taxes
 12 Months Ended
Oct. 31, 2011
Income Taxes [Abstract]  
INCOME TAXES

13. INCOME TAXES

The provision (benefit) for income taxes for the years ended October 31, 2011, 2010 and 2009 consists of:

 

                         
    2011     2010     2009  

Current:

                        

Federal

   $ 274     $ —       $ —    

State

     152       (1,656 )      (1,115 ) 

Deferred:

                        

Federal

     3,954       (403 )      (2,273 ) 

State

     77       (84 )      (484 ) 

Impact of change in effective tax rates on deferred taxes

     1,937       1,312       (1,760 ) 

Less: valuation allowance

     (5,968 )      (825 )      4,517  
   

 

 

    

 

 

    

 

 

  
    $ 426     $ (1,656 )    $ (1,115 ) 
   

 

 

    

 

 

    

 

 

  

The difference between income taxes computed at the statutory federal rate and the provision for income taxes for 2011, 2010 and 2009 relates to the following:

 

                                                 
    2011     2010     2009  
    Amount     Percent  of
Pretax
income		     Amount     Percent  of
Pretax
income		     Amount     Percent  of
Pretax
income		  

Tax (benefit) at federal statutory rate

   $ 2,469       34 %    $ (894 )      (34 )%    $ (2,823 )      (34 )% 

State income taxes, net of federal income taxes

     229       3 %      (84 )      (3 )%      (515 )      (6 )% 

Effect of warrant liability

     968       13 %      (164 )      (6 )%      141       2 % 

Effect of sale of NOL

     —         —   %      563       21 %      379       4 % 

Effect of other permanent items

     48       1 %      34       2 %      61       1 % 

Impact of change in effective tax rates on deferred taxes

     1,937       27 %      1,312       50 %      (1,760 )      (21 )% 

Sale of state net operating losses

     —         —   %      (1,656 )      (63 )%      (1,115 )      (13 )% 

Change in valuation allowance

     (5,968 )      (82 )%      (825 )      (32 )%      4,517       54 % 

Reduction of deferred benefits

     743       10 %      58       2 %      —       — % 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  
    $ 426       6 %    $ (1,656 )      (63 )%    $ (1,115 )      (13 )% 
   

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

The components of deferred income tax assets (liabilities) were as follows:

 

                 
    October 31,  
    2011     2010  

Impairment of capitalized software development costs and prepaid license fees not currently deductible

   $ 1,448     $ 209  

Depreciation and amortization

     (174 )      17  

Impairment of inventory

     631       80  

Compensation expense not deductible until options are exercised

     224       1,715  

All other temporary differences

     1,006       471  

Net operating loss carry forward

     23,703       30,314  

Less valuation allowance

     (26,838 )      (32,806 ) 
   

 

 

    

 

 

  

Deferred tax asset

   $ —       $ —    
   

 

 

    

 

 

  

Realization of deferred tax assets, including those related to net operating loss carryforwards, are dependent upon future earnings, if any, of which the timing and amount are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. Based upon the Company’s current operating results, management cannot conclude that it is more likely than not that such assets will be realized. In the year ended October 31, 2011, the Company reversed valuation allowances to the extent of net operating loss carryforwards used and income tax expense reflects alternative minimum tax and state tax liabilities.

Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the “change in ownership” provisions of the Internal Revenue Code. The annual limitation may result in the expiration of net operating loss carryforwards before utilization. The net operating loss carryforwards available for income tax purposes at October 31, 2011 amounts to approximately $68.7 million and expires between 2025 and 2030 for federal income taxes, and approximately $21.6 million for state income tax, which expires between 2013 and 2030.

 

The Company files income tax returns in the U.S., various states and the United Kingdom. As of October 31, 2011, the Company had no unrecognized tax benefits, which would impact its tax rate if recognized. As of October 31, 2011, the Company had no accrual for the potential payment of penalties and interest. As of October 31, 2011, the Company was not subject to any U.S. federal, state or foreign income tax examinations. The Company’s U.S. federal tax returns have been examined for the tax years 2003 through 2004, and income taxes for Majesco Europe Limited have been examined for the year ended October 31, 2006 in the United Kingdom with the results of such examinations being reflected in the Company’s results of operations as of October 31, 2011. The Company does not anticipate any significant changes in its unrecognized tax benefits over the next 12 months.

In the years ended October 31, 2011, 2010 and 2009, the Company received proceeds of approximately $0, $1.7 million and $1.1 million, respectively, from the sale of the rights to approximately $0, $21.2 million and $25.9 million, respectively, of New Jersey state income tax net operating loss carryforwards, under the Technology Business Tax Certificate Program administered by the New Jersey Economic Development Authority, which is reflected as an income tax benefit in the consolidation statements of operations.