34%

The types of temporary differences between the tax basis of assets and liabilities and their approximate tax effects that give rise to a significant portion of the net deferred tax asset at and were as follows:

September

  the Company had net deferred tax assets of approximately The deferred tax assets are primarily composed of federal and state NOL carryforwards and federal and state research and development (“R&D”) credit carryforwards. At the Company had federal NOL carryforwards of approximately which expire from through The Company also has an estimated and of federal and state R&D tax credits, respectively, at a portion of which will begin to expire in the tax year. The Company recognizes windfall tax benefits associated with the exercise of stock options directly to stockholders’ equity only when realized. Accordingly, deferred tax assets are recognized for NOL carryforwards resulting from windfall tax benefits occurring from onward. At deferred tax assets do include excess tax benefits from stock-based compensation of approximately

its ability to realize its deferred tax assets on a quarterly basis.

In doing so, management considers historical and projected taxable income of the Company, along with any tax planning strategies and any other positive or negative evidence. Realization is dependent on generating sufficient taxable income prior to the expiration of the loss carryforwards and other deferred assets. The Company has sustained profitability over of the most recent fiscal years. In the past few years, the Company has developed products and expanded its marketing efforts into the mass notification market, which is a very large and growing market. While the Company is still in the early stages of market penetration, it has increased its confidence in forecasted taxable income based on growth opportunities in this market. It has also increased its forecasted revenues and taxable income for its directional product opportunities, where it is a leading player in the world market. As a result, du

ring the quarter ended the Company determined it was more likely than that a portion of the deferred tax assets will be realized and, accordingly, released a portion of the valuation allowance. While the Company incurred net losses in the years ended and it was significantly impacted by a non-recurring expense in fiscal and primarily due to non-recurring expense in fiscal The Company expects to utilize the deferred tax asset in the future. The Company adjusted its deferred tax asset value in the quarter ended and continues to maintain a valuation allowance of Since future financial results differ from previous estimates, periodic adjustments to the Company’s valuation allowances be necessary.

recorded a tax provision for the minimum state tax requirement for the year ended as the Company’s annual effective tax rate is zero. During the quarter ended the Company amended its federal tax return for the year ended to make an election to carry back its fiscal year ended applicable NOL for a period of years, and carry forward the loss for up to years, as per Section (b)()(H) of the Internal Revenue Code of (“Section ), as amended per the American Recovery and Reinvestment Tax Act of for eligible small businesses. As of the Company had unrecognized tax benefits. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

’s historical tax years are subject to examination by the Internal Revenue Service and various state jurisdictions due to the generation of NOL and credit carryforwards.