Note 12. Income Taxes

Income (loss) before income taxes and provision for income taxes for the years ended April 30 were as follows (in thousands):


		2013		2012		2011
Domestic	$	774	$	(16,436)	$	(14,017)
Foreign		40		(73)		(2,593)
Total income (loss) before income taxes	$	814	$	(16,509)	$	(16,610)

Current
Foreign taxes	$	89	$	(74)	$	52
Federal and state income taxes		3		83		4
Total current		92		9		56

Deferred
Foreign taxes		-		-		(91)
Federal and state income taxes		190		144		90
Total deferred		190		144		(1)
Provision for income taxes	$	282	$	153	$	55

The provision for income taxes for the years ended April 30, 2013, 2012 and 2011 differs from the amounts computed by applying the statutory U.S. federal income tax rate to pretax income (loss) as a result of the following (in thousands):


		2013		2012		2011
Computed tax expense (benefit) at statutory rate	$	277	$	(5,613)	$	(5,795)
Increases (reductions) in tax expense resulting from:
Change in valuation allowance for deferred tax assets		(88)		(1,752)		1,105
Stock-based compensation		182		297		259
Impairment		-		-		3,806
Change in fair value of warrants		(124)		(358)		(176)
Foreign operations		(3)		(4)		852
Net operating loss carryforward limitation		(235)		7,352		-
Foreign Taxes		125		(377)		-
Foreign Tax Credits		(70)		(39)		-
Other		218		647		4
Provision for income taxes	$	282	$	153	$	55

The Company provides deferred income taxes which reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities at April 30 were as follows (in thousands):


		2013		2012
Deferred tax assets (liabilities):
Non-current assets
Net operating loss carryforwards	$	11,659	$	12,010
Capital loss carryforward		8		92
Foreign tax credits		386		224
Domestic fixed assets and other intangibles		5,038		5,106
Reserves and other accruals		629		1,034
Current assets
Deferred revenue		85		213
Allowance for losses on accounts receivable		107		131
Reserves and other accruals		466		412
Total deferred tax assets		18,378		19,222
Valuation allowance		(18,345)		(19,187)
Non-current liabilities
Domestic fixed assets and other intangibles		(33)		(35)
Foreign fixed assets and other intangibles		-		-
Goodwill		(890)		(699)
Total deferred tax liabilities		(923)		(734)
Net deferred tax assets (liabilities)	$	(890)	$	(699)

Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. Accordingly, the Company has maintained a full valuation allowance against its net deferred tax assets in all the tax jurisdictions. The valuation allowance decreased by $0.8 million in fiscal 2013, decreased by $1.9 million in fiscal 2012, and increased by $1.0 million in fiscal 2011.

At April 30, 2013, the Company had approximately $28.6 million in federal net operating loss (“NOL”) carryforwards after write-off of the limitations under the Internal Revenue Code Section 382 caused by changes in ownership, that begin to expire in fiscal year 2014 through 2033, approximately $8.2 million in California state NOL carryforwards that expire in fiscal years 2014 to 2033, approximately $84.5 million in other state NOL carryforwards that expire in fiscal years 2014 to 2033, and approximately $1.7 million in foreign NOL carryforwards that do not expire. At April 30, 2013, the Company had $0.2 million in California capital loss carryforwards, which will not expire for State of California purposes.

It is the intention of the Company to reinvest the earnings of its non-U.S. subsidiary in the operations. The Company does not provide for U.S. income taxes on the earnings of foreign subsidiary as such earnings are to be reinvested indefinitely. As of April 30, 2013, there is minimal amount of cumulative earnings upon which U.S. income taxes have not been provided.

At April 30, 2013, the Company had no state income tax payable, $0.1 million of foreign income tax payable, $0.2 million of state income tax receivable, and $0.1 million of foreign income tax receivable.

Uncertain Tax Positions

As of April 30, 2013 and 2012, the Company had no amount of unrecognized tax benefits.

It is the Company’s policy to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. As of April 30, 2013, the Company has not recorded any interest or penalties associated with any unrecognized tax benefits.

The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized benefits will increase or decrease within 12 months of the year ended April 30, 2013.

The Company is subject to income taxes in the U.S. federal jurisdiction, and various states and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In general, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for the fiscal years before 2009.