9. Income Taxes

The Company and certain of its subsidiaries file income tax returns in the US and in various state jurisdictions. With few exceptions, the Company is no longer subject to US federal, state and local, or non-US income tax examinations by tax authorities for years before 2008.

The Internal Revenue Service (IRS) has not notified the Company of any scheduled examination of the Company’s US income tax returns for 2008 through 2011. As of December 31, 2012, the IRS has proposed no adjustments to the Company’s tax positions.

There are no amounts included in the balance at December 31, 2012 and 2011 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

It is the Company’s policy to recognize any interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the year ended December 31, 2012, the Transition Period ended December 31, 2011and the fiscal year ending June 30, 2011, the Company recognized no interest or penalties.

The tax effects of temporary differences giving rise to the Company’s deferred tax assets (liabilities) are as follows:

	December 31, 2012			Transition Period December 31, 2011			June 30, 2011
Deferred tax assets:
Net operating loss and capital loss carryforwards	$	15,927,209		$	14,729,408		$	14,392,334
Related party accruals	—			1,504,366			2,119,780
Allowance for doubtful accounts	—			—			95,281
Vacation and workers compensation	11,559			—			110,984
Impairment loss on assets held for sale	—			—			1,428,618
Other temporary differences	—			397,552			—
Intangible assets	852,051			—			—
Valuation allowance	(16,551,236		)	(16,403,028		)	(17,633,225		)
Total deferred tax assets	239,583			228,298			513,772

Deferred tax liabilities:
Depreciation and amortization expenses	(131,713		)	(60,237		)	(256,959		)
Amortization of intangible assets	—			(29,521		)	(113,804		)
Other temporary differences	(107,870		)	(138,540		)	(143,009		)
Total deferred tax liabilities	(239,583		)	(228,298		)	(513,772		)

Net deferred tax assets	$	—		$	—		$	—

As a result of significant historical pretax losses, management cannot conclude that it is more likely than not that the deferred tax asset will be realized. Accordingly, a full valuation allowance has been established against the total net deferred tax asset. Because the benefit of the deferred tax assets offset any provision for income tax purposes, the entire provision for income tax expense, if any, represents amounts currently due state tax jurisdictions for continuing operations. The valuation allowance increased by $148,208 to $16,551,236 for the year ended December 31, 2012; decreased by $1,230,197 to $16,403,028 during the Transition Period ended December 31, 2011 and increased by $1,058,354 to $17,633,225 in the fiscal year ended June 30, 2011.

The Company’s income tax provision (benefit) differs from that obtained by using the federal statutory rate of 34% as a result of the following:

				Transition Period			Year Ended
	December 31, 2012			December 31, 2011			June 30, 2011

Federal income taxes at 34%	$	(907,399	)	$	1,664,388		$	(1,364,291	)
Effect of permanent differences	16,562			(556,272		)	(36,984		)
Other	742,629		**	122,081			377,191
State income tax	93,114			157,400			66,525
Change in valuation allowance — current year	148,208			(1,230,197		)	1,058,354

Net income tax expense	$	93,114		$	157,400		$	100,795	*

* Included in discontinued operations.

** Includes certain intangibles deducted in prior years

At December 31, 2012, the Company had an available a net operating loss carryforwards of approximately $46,844,733. This amount is available to reduce the Company’s future taxable income and expires in the years 2014 through 2032 as follows:

Year of	NOL
Expiration	Carryover
2014	—
2017	3,830,504
2018	7,017,587
2019	5,878,720
2020	4,942,777
2021	4,434,157
2022	3,438,195
2024	2,338,824
2025	1,055,115
2026	2,542,659
2027	1,209,152
2028	976,338
2029	1,627,859
2030	2,948,105
2030	118,767
2032	4,485,974
	$	46,844,733