Annual report pursuant to section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Mar. 31, 2013
Income Taxes
15. Income Taxes

The difference between taxes at actual rates and the federal statutory rate was as follows:


     Year Ended     Year Ended  
     March 31     March 31  
     2013     2012  

Statutory Federal Income Taxes

     (4,936     (10,086

State income taxes, net of federal benefit

     (732     (1,447

Write down of goodwill and other perm diff

     492        1,790   

Foreign Expense

     39        88   

Increase in Valuation Allowance

     5,227        9,765   







Income tax provision (benefit)

     90        110   







Deferred tax assets and liabilities consist of the following:


     Year Ended     Year Ended  
     March 31,     March 31,  
     2013     2012  

Net Operating Loss Carryforward

   $ 26,864      $ 24,188   

Amortization of Intangible Asset

     (1,134     (1,404

Stock-based compensation

     13,329        11,735   

Credit Carryforwards

       (248 )


     867        54   







Deferred Tax

     39,927        34,325   

Valuation Allowance

     (39,927     (34,325







Net Deferred Tax Asset

   $ —       $ —    







In accordance with ASC 740 and based on all available evidence on a jurisdictional basis, the Company believes that, it is more likely than not that its deferred tax assets will not be utilized, and has recorded a full valuation allowance against its net deferred tax assets in each jurisdiction.

As of March 31, 2013, the Company had net operating loss (NOL) carry-forwards to reduce future U.S. Federal and Israeli income taxes of approximately $66,923, expiring in various years ranging through 2031. Utilization of the NOLs may be subject to a substantial annual limitation due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state limitations. These ownership changes may limit the amount of NOLs that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code, results from a transaction of series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock by a company by certain stockholders or public groups.


As of March 31, 2013, realization of the Company’s net deferred tax asset of approximately $39,927 was not considered more likely than not and, accordingly, a valuation allowance of $39,927 has been provided. During the year ended March 31, 2013, the valuation allowance increased by $5,602.

ASC 740 requires the consideration of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Significant management judgment is required in determining any valuation allowance recorded against deferred tax assets.

The Company adopted the provisions of ASC 740 on January 1, 2008 and there was no difference between the amounts of unrecognized tax benefits recognized in the balance sheet prior to the adoption of ASC 740 and those after the adoption of ASC 740.

ASC 740 provides guidance on the minimum threshold that an uncertain income tax position is required to meet before it can be recognized in the financial statements and applies to all tax positions taken by a company. ASC 740 contains a two-step approach to recognizing and measuring uncertain income tax positions. The first step is to evaluate the income tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. If it is not more likely than not that the benefit will be sustained on its technical merits, no benefit will be recorded. Uncertain income tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. We recognize accrued interest and penalties related to uncertain income tax positions in income tax expense on our consolidated statement of income. On a quarterly basis, we evaluate uncertain income tax positions and establish or release reserves as appropriate under GAAP.

The Company’s income is subject to taxation in both the U.S. and foreign jurisdictions. Significant judgment is required in evaluating the Company’s tax positions and determining its provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. The Company establishes reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves for tax contingencies are established when the Company believes that certain positions might be challenged despite the Company’s belief that its tax return positions are fully supportable. The Company adjusts these reserves in light of changing facts and circumstances, such as the outcome of a tax audit or lapse of a statute of limitations. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.

There were no unrecognized tax benefits not subject to valuation allowance as at March 31, 2013 and March 31, 2012. The Company recognized no interest and penalties on income taxes in its statement of operations for the year ended March 31, 2013; or the year ended March 31, 2012. Management has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements as of March 31, 2013. The Company’s Federal and State income tax returns remain subject to examination for all tax years ended 2009 and 2008, respectively. The Company is currently under audit examination by the IRS of the tax year December 31, 2010.