Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.6
Income Taxes
 12 Months Ended
Sep. 30, 2012
Income Taxes [Abstract]  
Income Taxes
14. Income Taxes

The components of the provision for income taxes are as follows:
 
 
 
Year Ending September 30,
 
(In Thousands)
 
2012
 
 
2011
 
 
 
 
 
 
 
 
Current tax provision
 
$
—
 
 
$
—
 
Deferred tax provision (credit) related to:
 
 
 
 
 
 
 
 
Temporary differences
 
 
 
 
 
 
 
     Stock option Expense
 
 
74
 
 
 
2
 
     Deferred compensation expense
 
 
(60
)
 
 
(57
 )
     Vacation expense
 
 
39
 
 
 
32
 
     Intangible assets
 
 
94
 
 
 
(272
 )
     Allowance for doubtful accounts
 
 
46
 
 
 
19
 
     Other
 
 
(45
)
 
 
(24
 )
Loss carryforwards
 
 
(194
 )
 
 
104
 
Valuation allowances
 
 
46
 
 
 
196
 
 
 
 
 
 
 
 
 
 
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)
 
2012
 
 
2011
 
 
 
 
 
 
 
 
Income tax provision at statutory federal tax rate
 
$
50
 
$
122
Valuation allowance
 
 
(50
)
 
 
(122
)
 
 
 
 
 
 
 
 
Provision for income taxes
 
$
—
 
 
$
—
 

The net deferred income tax asset balance related to the following:
 
 
Year Ended September 30,
 
(In Thousands)
 
2012
 
 
2011
 
 
 
 
 
 
 
 
Temporary differences
 
 
$
 
     Stock option Expense
$
217
138
     Deferred compensation expense
120
184
     Vacation expense
30
47
     Intangible assets
107
282
     Allowance for doubtful accounts
104
55
     Other
85
105
Net operating loss carryforwards
 
 
3,560
 
 
3,366
Valuation allowances
 
 
(4,223
)
 
 
(4,177
)
 
 
 
 
 
 
 
 
 
Net deferred income tax asset
 
$
—
 
 
$
—
 
 
As of September 30, 2012 there were approximately $8,900,000 of losses available to reduce federal taxable income in future years through 2031, and there were approximately $7,525,000 of losses available to reduce state taxable income in future years, expiring from 2012 through 2031.  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, 2012 and 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.  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, 2012 and 2011.
 
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. As a result, the valuation allowance on our net deferred tax assets decreased by approximately $131,000 for the year ended September 31, 2012.

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.