INCOME TAXES

12 Months Ended

May 31, 2014

INCOME TAXES

INCOME TAXES

C. INCOME TAXES

The provision for income taxes includes the following for the years ended May 31 (in thousands):

		2014		2013
Federal	$	-	$	-
Foreign		-		13
State and local		2		2
Total current provision		2		15
Deferred provision		268		148
Valuation allowance		(268)		(148)
Total deferred provision		-		-
Total provision	$	2	$	15

The domestic and foreign components of income (loss) before income taxes were as follows for the years ended May 31 (in thousands):

		2014		2013
Domestic	$	(562)	$	343
Foreign		(184)		32
	$	(746)	$	375

At May 31, 2014, the Company had Federal net operating loss carryforwards of $20 million that begin expiring in 2022, and are available to reduce future taxable income. The utilization of the remaining net operating loss carryforwards may be subject to limitation based on past and future changes in ownership of the Company pursuant to Internal Revenue Code Section 382. The Company also has an alternative minimum tax credit of approximately $200,000 that has no expiration date that was available as of May 31, 2014.

The Company’s effective income tax rates can be reconciled to the federal and state statutory income tax rate for the years ended May 31 as follows:

	2014	2013
Federal statutory rate	34%	34%
State	-	-
Foreign	-	1
Permanent items	-	-
Valuation reserve	(34)	(34)
Effective tax rate	-	1%

Deferred tax assets (liabilities) were comprised of the following at May 31 (in thousands):

		2014		2013
Deferred tax assets
Net operating loss carryforwards	$	7,271	$	7,190
Tax credit carryforwards		254		254
Receivables allowances		7		11
Vacation pay accrual		9		10
Other accruals		-		-
Depreciation		37		35
Differences in book and tax basis of assets of acquired businesses		(859)		(1,050)
Total gross deferred tax assets		6,719		6,450
Valuation allowance		(6,719)		(6,450)
Net deferred tax asset	$	-	$	-

Due to the uncertainties regarding the realization of certain favorable tax attributes in future tax returns, the Company has established a valuation reserve against the otherwise recognizable net deferred tax assets.