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10. INCOME TAXES | 12 Months Ended
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Mar. 31, 2013
Income Tax Disclosure [Abstract] |
INCOME TAXES | On July 13, 2006, the FASB issued FASB Interpretation No. 48 (FIN 48), subsequently codified in ASC 740, Income Taxes, which clarifies the accounting for uncertainty in income taxes recognized in an entity's financial, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. We adopted the provisions of ASC 740 relating to uncertain tax provisions on April 1, 2007, and have commenced analyzing filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. As a result of adoption, no additional tax liabilities have been recorded. There are no unrecognized tax benefits as of March 31, 2013 or March 31, 2012. As of March 31, 2013, we have not yet completed our analysis of the deferred tax assets relating to federal and state net operating losses of $38.3 million and $33.1 million, respectively, and we believe that it is more likely than not that an ownership change may have occurred. As such, this amount and the offsetting valuation allowance have been removed from our deferred tax assets. We plan to complete a Section 382 analysis regarding the limitation of the net operating loss prior to utilizing any net operating losses. Due to the existence of the valuation allowance, any future changes in our unrecognized tax benefits will not impact our effective tax rate. We are subject to taxation in the U.S. and state jurisdictions. Our tax years for 2009 and forward are subject to examination by the U.S. and 2008 and forward by California tax authorities due to the carryforward of unutilized net operating losses. We are currently not under examination by any taxing authorities. Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense. During the twelve months ended March 31, 2013, we did not recognize any interest or penalties relating to tax matters. Upon adoption of ASC 740 on April 1, 2007, we did not record any interest or penalties. At March 31, 2013, we had net deferred tax assets of approximately $7.4 million. These deferred tax assets are primarily composed of capitalized research and development costs and other accruals. Due to uncertainties surrounding our ability to generate future taxable income to realize these assets, a full valuation has been established to offset the net deferred tax assets. Additionally, the future utilization of the our net operating loss carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that may have occurred previously or that could occur in the future. Significant components of our net deferred tax assets at March 31, 2013 and 2012 are shown below (in thousands). A valuation allowance of $7.4 million has been established to offset the net deferred tax assets as of March 31, 2013, as realization of such assets is uncertain.
|  | YEAR ENDED MARCH 31, |
|  | 2013 |  |  | 2012 |
Deferred tax assets: |  |  |  |  |  |  |  |
Capitalized research and development |  | $ | 3,442 |  |  | $ | 3,442 |
Other |  |  | 3,951 |  |  |  | 3,803 |
Total deferred tax assets |  |  | 7,393 |  |  |  | 7,245 |
Total deferred tax liabilities |  |  | – |  |  |  | – |
Net deferred tax assets |  |  | 7,393 |  |  |  | 7,245 |
Valuation allowance for deferred tax assets |  |  | (7,393 | ) |  |  | (7,245 | )
Net deferred tax assets |  | $ | – |  |  | $ | – |
The provision for income taxes on earnings subject to income taxes differs from the statutory federal rate at March 31, 2013, due to the following (in thousands):
|  | 2013 |  |  | 2012 |
Federal income taxes at 34% |  | $ | (1,663 | ) |  | $ | (2,758 | )
State income tax, net of federal benefit |  |  | (285 | ) |  |  | (473 | )
Tax effect on non-deductible expenses and credits |  |  | 77 |  |  |  | 1,244 | )
Increase in valuation allowance1 |  |  | 1,871 |  |  |  | 1,987 |
|  | $ | – |  |  | $ | – |
1 The change in the valuation analysis includes the removal of the current year net operating loss. Pursuant to Internal Revenue Code Sections 382, use of our net operating loss carryforwards may be limited if a cumulative change in ownership of more than 50% occurs within a three-year period.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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