4. INCOME TAXES

The following is a reconciliation of the expected income tax provision or benefit at the statutory federal income tax rate to the actual provision or benefit:

	Years Ended April 30,
	2012			2011
(Amounts in thousands)
Expected federal income tax provision (benefit)	$	428		$	(326	)
State taxes, net of federal benefit		2			(54	)
Permanent differences		10			12
Change in valuation allowance		(6,218	)		(5,264	)
Research and development credits		-			22
Net operating loss carryover expiration		5,804			5,615
Refundable alternative minimum tax credits		-			(10	)
Other		(1	)		(5	)
	$	25		$	(10	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the carrying amounts used for income tax purposes. As of April 30, 2012 and 2011, the Company had net deferred tax assets of $8.6 million and $14.9 million, respectively, primarily attributable to its net operating loss carryforwards as further described below. The Company has provided a valuation allowance against the entire balance of its net deferred tax assets at April 30, 2012 and 2011 due to the uncertainty regarding realization. The $6.3 million decrease in the deferred tax assets in 2012 was due primarily to the effects of the expiration of federal net operating loss carryforwards.

Significant components of the Company's deferred tax assets are as follows:

(Amounts in thousands)	April 30, 2012			April 30, 2011
Deferred tax assets:
Net operating loss, general business credit and AMT carryforwards	$	7,054		$	13,466
Deferred revenue		84			84
Reserves and accruals		1,445			1,269
Other		-			42
		8,583			14,861
Deferred tax liabilities:
Other		(24	)		-
Net deferred tax assets before valuation allowance		8,559			14,861
Valuation allowance		(8,559	)		(14,861	)
Net deferred taxes	$	-		$	-

As of April 30, 2012, the Company has approximately $18.8 million in Federal net operating loss carryforwards that will expire from 2012 through 2031, unless previously utilized. Additionally, as of April 30, 2012, the Company has approximately $2.4 million in California net operating loss carryforwards that will expire from 2031 through 2033, unless previously utilized. In addition, as of April 30, 2012, the Company has approximately $284,000 in Federal research and development credit carryforwards that begin to expire in 2020, and $172,000 of California research and development credit carryforwards that can be carried forward indefinitely. The Company also has approximately $132,000 in Federal alternative minimum tax credits that can be carried forward indefinitely.

Pursuant to the Tax Reform Act of 1986, Internal Revenue Code Section 382, utilization of the Company's Federal credit and net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within any three-year period.

The Company and its subsidiaries are subject to Federal income tax as well as income tax of state jurisdictions. With few exceptions, the Company is no longer subject to income tax examination by tax authorities in major jurisdictions for years prior to April 30, 2008. However, to the extent allowed by law, the taxing authorities may have the right to examine prior periods where NOLs were generated and carried forward, and make adjustments up to the amount of the carryforwards. The Company is not currently under examination by the IRS or state taxing authorities.

The Company recognizes interest and penalties as a component of income tax expense. There were no interest and penalties for the years ended April 30, 2012 and 2011.