Note 10. Income Taxes

12 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Text Block]

Note 10. Income Taxes

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial accounting purposes and the amounts used for income tax reporting. Significant components of the Company’s deferred tax assets are as follows:

	June 30,
	2012			2011
Deferred Tax Assets
Net operating loss	$	14,613		$	13,268
Capital loss carryover		1,290			1,290
Valuation adjustment on investment		638			638
Depreciation		88			41
Inventory		839			752
Other		580			874
Valuation allowance		(18,048	)		(16,863	)
Total deferred tax asset		-			-
Less current portion		-			-
Net long-term deferred tax asset	$	-		$	-

Net operating losses (“NOL”) of approximately $37,498 will expire beginning in 2024 for federal purposes. State NOL’s of approximately $26,322 expires beginning in 2013 through 2030 depending on the state in which the NOL’s were generated. The Company also has capital losses of $3,230 which will begin to expire in 2013.

Realization of the NOL carryforwards and other deferred tax temporary differences is contingent on future taxable earnings. The Company’s deferred tax asset was reviewed for expected utilization using a “more likely than not” approach by assessing the available positive and negative evidence surrounding its recoverability. Accordingly, a valuation allowance has been recorded against the Company’s deferred tax asset, as it was determined based upon past and present losses that it was “more likely than not” that the Company’s deferred tax assets would not be realized. The valuation allowance was increased to the full carrying amount of the Company’s deferred tax assets in the fiscal year ended June 30, 2009.  In future years, if the deferred tax assets are determined by management to be “more likely than not” to be realized, the recognized tax benefits relating to the reversal of the valuation allowance as of June 30, 2012 will be recorded. The Company will continue to assess and evaluate strategies that will enable the deferred tax asset, or portion thereof, to be utilized, and will reduce the valuation allowance appropriately as such time when it is determined that the “more likely than not” criteria is satisfied.

The components of the provision for income taxes consists of the following:

	For the fiscal year ended June 30,
	2012			2011
Current - Federal	$	-		$	-
Current - State and local		11			25
Deferred - Federal and state		1,174			356
Change in valuation allowance		(1,174	)		(356	)
Income tax expense (benefit)	$	11		$	25

A reconciliation of the statutory tax rate to the effective tax rate is as follows:

	For the fiscal year ended June 30,
	2012			2011
Statutory federal income tax rate		34	%		34	%
Change in valuation allowance		39	%		16	%
Stock based compensation		0	%		8	%
Statutory state income tax rate		6	%		6	%
Non-deductible interest expense		0	%		15	%
Other items, net		1	%		1	%
Effective income tax rate		0	%		0	%

There were no significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded on the Company’s consolidated financial statements for the year ended June 30, 2012.  Additionally, there were no interest or penalties outstanding as of or for each of the fiscal years ended June 30, 2012 and 2011.

The federal and state tax returns for the years ending June 30, 2009, 2010 and 2011 are currently open and the tax returns for the year ended June 30, 2012 will be filed by March 15, 2013.