Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Sep. 30, 2011
Cash and Cash Equivalents [Abstract]  
Cash and Cash Equivalents
7. Income Taxes

The components of the provision for income taxes are as follows:
   
Year Ending September 30
  
(In Thousands)
  
2011
    
2010
  
             
Current tax provision
   $ -     $ -  
Deferred tax provision (credit) related to:
                
Temporary differences
     (300 )     2  
Loss carryforwards
     104       (590 )
Valuation allowances
     196       588  
                 
Provision for income taxes
   $ -     $ -  

The differences between income taxes calculated at the 34% statutory U.S. federal income tax rate and the Company's provision for income taxes are as follows:

 
Year Ended September 30
  
(In Thousands)
2011
  
2010
  
         
Income tax provision (credit) at statutory federal tax rate
   $ 122     $ (529 )
Federal valuation allowance
     (122 )     529  
                 
Provision for income taxes
   $ -     $ -  

The net deferred income tax asset balance as of September 30 related to the following:

(In Thousands)
  
2011
    
2010
  
             
Temporary differences
   $ 811     $ 511  
Net operating loss carryforwards
     3,366       3,470  
Valuation allowances
     (4,177 )     (3,981 )
                 
Net deferred income tax asset
   $ -     $ -  
 
As of September 30, 2011 there were approximately $8,500,000 of losses available to reduce federal taxable income in future years through 2030, and there were approximately $7,000,000 of losses available to reduce state taxable income in future years, expiring from 2011 through 2030. Due to common stock transactions in the current and prior years, it is likely that the Company will be limited by Section 382 of the Internal Revenue Code as to the amount of net operating losses that may be used in future years. The Company is currently evaluating the effects of any such limitation.

Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of September 30, 2011, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company also considered whether there was any currently available information about future years. Because long-term contracts are not a significant part of the Company's business, future results cannot be reliably predicted by considering past trends or by extrapolating past results. Moreover, the Company's earnings are strongly influenced by national economic conditions and have been volatile in the past. Considering these factors, the Company determined that it was not possible to reasonably quantify future taxable income. Based on the weight of available evidence, the Company determined that it is more likely than not that all of the deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of September 30, 2011.

As of September 30, 2011, the Company's federal income tax returns for fiscal 2008 and subsequent years were subject to examination. The Company's policy is to recognize penalties and interest in income tax expense; however, no penalties or interest were recognized in fiscal 2011 or 2010.