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Income Taxes
 12 Months Ended
Jan. 31, 2013
Income Tax Disclosure [Abstract]  
Income Taxes

9. Income Taxes

 

The Company uses the liability method of accounting for income taxes as set forth in ASC 740 (formerly Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”)). Under the liability method, deferred taxes are determined based on differences between the financial statement and tax bases of assets and liabilities using enacted tax rates. As of January 31, 2013, the Company had federal and California tax net operating loss carryforwards of approximately $9,046,000 and $9,039,000, respectively. The federal and California net operating loss carryforwards will expire at various dates from 2028 through 2032. Pursuant to Internal Revenue Code Sections 382 and 383, use of the Company’s net operating loss and credit carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within any three-year period since the last ownership change. The Company may have had a change in control under these Sections. However, the Company does not anticipate performing a complete analysis of the limitation on the annual use of the net operating loss and tax credit carryforwards until the time that it projects it will be able to utilize these tax attributes.

 

Significant components of the Company’s deferred tax assets as of January 31, 2013 and January 31, 2012 are shown below. A valuation allowance of $4,164,591 and $933,420 as of January 31, 2013 and 2012, respectively, has been established against the Company’s deferred tax assets as realization of such assets is uncertain. The Company’s effective tax rate is different from the federal statutory rate of 34% due primarily to operating losses that receive no tax benefit as a result of a valuation allowance recorded for such losses.

 

Deferred tax assets (liabilities) consist of the following at January 31:

 

    2013     2012  
             
NOL carry forward   $ 3,967,114     $ 849,591  
Stock options - exercisable     741,971       81,775  
Contribution carryforward     8,740       6,970  
Warrant liability     -       51,408  
State income taxes     544       1,247  
Accrual to cash     (243,300 )     (76,500 )
State income taxes, deferred     (310,478 )     (71,035 )
Impairment loss     -       89,964  
Other, net     -       -  
Net Deferred Tax Assets     4,164,591       933,420  
Valuation Allowance     (4,164,591 )     (933,420 )
    $ -     $ -  

 

 The provision for income taxes differs from the amount computed by applying the federal income tax rate as follows for the year ended January 31:

 

    2013       2012  
Tax computed at the statutory rate (34%)     0.34 %     0.34 %
Stock options     (0.06 )%     (0.01 )%
Accrual to cash     - %     0.01 %
Warrant liability     - %     (0.05 )%
Impairment Loss     - %     (0.08 )%
Non-cash stock compensation     - %     (0.06 )%
Change in valuation     (0.28 )%     (0.15 )%
      - %     - %

  

As of January 31, 2013, the Company does not have any unrecognized tax benefits related to various federal and state income tax matters. The Company will recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense.

 

The Company is subject to U.S. federal income tax as well as income tax of multiple state tax jurisdictions. The Company and its subsidiaries’ state income tax returns are open to audit under the statute of limitations for the years ended January 31, 2010 through 2013. The Company does not anticipate material unrecognized tax benefits within the next 12 months.