NOTE 6 - INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and for income tax purposes. The Company evaluates the realizability of its deferred income tax assets and a valuation allowance is provided, as necessary. In assessing this valuation allowance, the Company reviews historical and future expected operating results and other factors, including its recent cumulative earnings experience, expectations of future taxable income by taxing jurisdiction and the carryforward periods available for tax reporting purposes, to determine whether it is more likely than not that deferred tax assets are realizable.
The Company is subject to filing income tax returns in the U.S. federal jurisdiction, various U.S. states, Canada, France and New Zealand. Income tax returns filed for fiscal years 2007 and earlier are not subject to examination by U.S. federal and state tax authorities. Certain income tax returns for fiscal years 2008 through 2012 remain open to examination by U.S. federal and state tax authorities. Income tax returns for fiscal years 2009 through 2012 remain open to examination by tax authorities in Canada and France. The Company believes that it has made adequate provision for all income tax uncertainties pertaining to these open tax years.
At May 31, 2012, the Company had a net deferred income tax asset balance of $11,887,000. The current portion of the deferred tax assets is $5,206,000 and the non-current portion is $6,681,000. The net deferred income tax asset balance is comprised of a gross deferred tax asset of $49.1 million and a valuation allowance of $37.2 million.
No income tax provision, other than minimum income taxes, was recorded during the quarters ended May 31, 2012 and May 31, 2011 because of the existence of net operating loss carryforwards that offset the pre-tax income.