Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.2.0.727
INCOME TAXES
12 Months Ended
Apr. 30, 2015
Income Tax Disclosure [Abstract]  
INCOME TAXES
NOTE 9 - INCOME TAXES
 
Loss from continuing operations before provision for income taxes shown below is based on the geographic locations to which such loss is attributed for the years ended April 30:
 
 
 
Years Ended
 
 
 
April 30,
 
 
 
2015
 
2014
 
Loss income before income taxes:
 
 
 
 
 
 
 
Domestic
 
$
(6,928,103)
 
$
(10,690,849)
 
Foreign
 
 
-
 
 
-
 
Totals
 
$
(6,928,103)
 
$
(10,690,849)
 
  
The provision for income taxes from continuing operations for the years ended April 30, 2015 and 2014 is summarized as follows:
 
 
 
Years Ended
 
 
 
April 30,
 
 
 
2015
 
2014
 
Current
 
 
 
 
 
 
 
Federal
 
$
-
 
$
-
 
State
 
 
69,679
 
 
32,922
 
Foreign
 
 
-
 
 
-
 
Totals
 
 
69,679
 
 
32,922
 
Deferred
 
 
 
 
 
 
 
Federal
 
 
-
 
 
(330,764)
 
State
 
 
-
 
 
-
 
Foreign
 
 
-
 
 
-
 
Totals
 
 
-
 
 
(330,764)
 
Total provision for income taxes (benefits)
 
$
69,679
 
$
(297,842)
 
  
The actual provision for income taxes from continuing operations reflected in the consolidated statements of operations for the years ended April 30, 2015 and 2014 differs from the provision computed at the federal statutory tax rates. The principal differences between the statutory income tax and the actual provision for income taxes are summarized as follows:
 
 
 
Years Ended
 
 
 
April 30,
 
 
 
2015
 
2014
 
Expected tax benefit at statutory rate (34%)
 
$
(2,355,555)
 
$
(3,634,889)
 
State and local taxes, net of federal tax benefit
 
 
(214,606)
 
 
(392,424)
 
Valuation allowance
 
 
(208,988)
 
 
1,413,818
 
Non deductible financing costs
 
 
963,857
 
 
2,274,805
 
Inducement expense
 
 
1,867,566
 
 
-
 
Other
 
 
17,405
 
 
40,848
 
Totals
 
$
69,679
 
$
(297,842)
 
 
Deferred tax assets and liabilities are provided for the effects of temporary difference between tax basis of an asset or liability and its reported amount in the consolidated balance sheets. These temporary differences result in taxable or deductible amounts in future years.
 
The components of the Company’s deferred tax assets and liabilities are as follows:
 
 
 
April 30, 2015
 
April 30, 2014
 
Deferred tax assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Allowance for doubtful accounts
 
$
34,392
 
$
55,140
 
Bonus and vacation accruals
 
 
79,274
 
 
667,992
 
Non-qualified stock options
 
 
144,972
 
 
76,850
 
Federal benefit for foreign tax credit
 
 
265,600
 
 
265,600
 
Accruals
 
 
-
 
 
57,045
 
Valuation allowance
 
 
(524,238)
 
 
(1,122,627)
 
 
 
 
 
 
 
 
 
Deferred tax assets-current
 
 
-
 
 
-
 
 
 
 
 
 
 
 
 
Intangible assets
 
 
-
 
 
39,232
 
Goodwill
 
 
-
 
 
35,638
 
Capital loss carryforward
 
 
3,884,389
 
 
949,973
 
Property and equipment
 
 
26,434
 
 
-
 
Net operating loss carryforward
 
 
12,262,334
 
 
11,346,435
 
Valuation allowance
 
 
(16,173,157)
 
 
(12,316,027)
 
 
 
 
 
 
 
 
 
Deferred tax assets-long term
 
 
-
 
 
55,251
 
 
 
 
 
 
 
 
 
Deferred tax liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property and equipment
 
 
-
 
 
55,251
 
Deferred tax liabilities-long term
 
 
-
 
 
55,251
 
 
 
 
 
 
 
 
 
Net deferred tax assets (liabilities)
 
$
-
 
$
-
 
 
At April 30, 2015, the Company has net operating loss carryforwards for Federal tax purposes approximating $30,900,000 expiring through 2035. The Company also has net operating loss carryforwards in multiple states approximating $34,400,000 and expiring in varying amounts through 2035. However, the future use of some or all of such carried forward domestic losses may be limited by Sec. 382 of Internal Revenue Code in the event of an ownership change, which may have been incurred as a result of the Company’s financing activities and other transactions among the Company’s shareholders, such as the Hartford and Lakewood asset sales and the Pride and BTX sales.
 
The Company considers past performance, expected future taxable income and prudent and feasible tax planning strategies in assessing the amount of the valuation allowance. The Company’s forecast of expected future taxable income is based over such future periods that it believes can be reasonably estimated. Based on its analysis as of April 30, 2015, the Company increased its valuation allowance by approximately $3,259,000 on its deferred tax assets. Due to the uncertainty of recognizing a tax benefit on loss carryforwards, the Company has provided a valuation allowance of approximately $16,697,000 April 30, 2015.
 
The tax change in the valuation allowance is listed below:
 
 
 
Years Ended
 
 
 
April 30,
 
 
 
2015
 
2014
 
Balance at beginning of the year
 
$
13,438,654
 
 
12,024,836
 
 
 
 
 
 
 
 
 
Charged (reversed) to costs and expenses
 
 
(208,988)
 
 
1,413,818
 
Capital loss from sale of Pride
 
 
3,467,729
 
 
-
 
Balance at end of the year
 
$
16,697,395
 
$
13,438,654
 
 
At April 30, 2015, the Company’s net deferred tax assets are fully offset by a valuation allowance. The Company continues to analyze the reliability of its deferred tax assets on a regular basis.
 
Accounting for uncertainty in income taxes requires uncertain tax positions to be classified as non-current income tax liabilities unless they are expected to be paid within one year. The Company has concluded that there are no uncertain tax positions requiring recognition in its consolidated financial statements as of April 30, 2015 and 2014. The Company recognizes interest accrued related to unrecognized tax benefits in interest expense. For the years ended April 30, 2015 and 2014 there was no interest expense relating to unrecognized tax benefits.
 
The Company had no undistributed earnings of its foreign subsidiary for the years ended April 30, 2015 and 2014.
 
The Company and its domestic subsidiaries file a U.S. federal consolidated income tax return. The U.S. federal statute of limitations remains open for the years April 30, 2012 and thereafter. State income tax returns are generally subject to examination for a period of 3 to 5 years after filing the respective return. The Company is not currently under examination by any taxing authority.