Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Sep. 30, 2013
Income Taxes [Abstract]  
Income Taxes
10. Income Taxes

The components of the provision for income taxes are as follows:
 
  
Year Ending September 30,
  
(In Thousands)
  
2013
    
2012
  
 
  
   
 
Current tax provision
  
$
—
    
$
—
  
Deferred tax provision (credit) related to:
                
Temporary differences
                
Stock option expense
    
17
      
74
  
Deferred compensation expense
    
63
      
(60
)
Vacation expense
    
(18
)
    
39
  
Intangible assets
    
37
      
94
  
Allowance for doubtful accounts
    
(27
)
    
46
  
Other
    
(36
)
    
(45
)
Loss carryforwards
    
(664
)
    
(194
)
Valuation allowances
    
714
      
46
  
 
                
Provision for income taxes
  
$
—
    
$
—
  
 
 
The differences between income taxes calculated at the statutory U.S. federal income tax rate and the Company’s provision for income taxes are as follows:

 
Year Ended September 30,
  
(In Thousands)
2013
  
2012
  
 
 
 
Income tax provision at statutory federal tax rate
  
$
22
    
$
50
  
Valuation allowance
    
(14
)
    
(50
)
 
                
Provision for income taxes
  
$
8
    
$
—
  

The net deferred income tax asset balance related to the following:
 
  
Year Ended September 30,
  
(In Thousands)
  
2013
    
2012
  
 
  
   
 
Temporary differences
  
   
 
Stock option Expense
  
$
326
    
$
217
  
Deferred compensation expense
    
(59
)
    
120
  
Vacation expense
    
69
      
30
  
Intangible assets
    
107
      
107
  
Allowance for doubtful accounts
    
74
      
104
  
Other
    
(49
)
    
85
  
Net operating loss carryforwards
    
4,292
      
3,560
  
Valuation allowances
    
(4,760
)
    
(4,223
)
 
                
Net deferred income tax asset
  
$
—
    
$
—
  

As of September 30, 2013, there were approximately $10,800,000 of losses available to reduce federal taxable income in future years through 2032, and there were approximately $9,500,000 of losses available to reduce state taxable income in future years, expiring from 2014 through 2032.  Due to common stock transactions in the 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, 2013 and 2012, 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.  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, 2013 and 2012.
 
As a result of continuing losses, we have determined that it is more likely than not that we will not realize the benefits of the deferred tax assets and therefore we have recorded a valuation allowance to reduce the carrying value of the deferred tax assets to zero.  The valuation allowance increased by $537,000 and $46,000 in 2013 and 2012, respectively.

We file federal and state income tax returns in jurisdictions with varying statutes of limitations. Due to our net operating loss carryforwards, our income tax returns generally remain subject to examination by federal and most state tax authorities. We are not currently under examination in any federal or state jurisdiction.