Income Taxes

12 Months Ended

Jun. 30, 2012

Income Taxes:

Income Taxes

Note 2 -   Income Taxes

Deferred income taxes arise from temporary timing differences in the recognition of income and expenses for financial reporting and for tax purposes. The Company’s deferred tax assets consist entirely of the benefit from net operating loss (NOL) and capital loss carry forwards. The net operating loss carry forward, if not used, will expire in various years through 2032, and is materially restricted, as per the Internal Revenue Code, due to the change in ownership discussed in Note 7. The Company’s deferred tax assets are offset by a valuation allowance due to the uncertainty of the realization of the net operating and capital loss carry forwards (capital loss carryforwards are approximately $432,000). Net operating and capital loss carry forwards may be further limited by other provisions of the tax laws. The Company’s U.S. federal and state  income tax returns, constituting the returns of the major taxing jurisdictions, are subject to examination by the taxing authorities for all open years as prescribed by applicable statute. The years open for examination are 2009, 2010, and 2011 and later years. No income tax waivers have been executed that would extend the period subject to examination beyond the period prescribed by statute.

The Company has estimated available net operating losses of $6,721,000 which can be utilized to offset future earnings of the Company. A valuation allowance is provided when it is more likely than not that some portion of the deferred tax asset will not be realized.  The valuation allowance increased by approximately $658,000 during the year end June 30, 2012.

The Company has the following carry forwards available at June 30, 2012 (State expiration is fifteen years earlier):

Operating and Capital Losses
Federal Expiration	Amount
2027	$      24,000
2028	812,000
2029	262,000
2030	1,068,000
2031	3,897,000
2032	318,000
Total	$ 6,381,000

The tax effects of temporary differences that give rise to significant portions of the deferred tax asset for the years ended at June 30, 2012 and 2011 are summarized below.  

	June 30, 2012	June 30, 2011
Current Deferred tax asset:
Payroll & vacation accruals	$       340,000	$       (380,088)
Non-Current Deferred tax asset:
Net operating losses	318,000	4,657,246
Non-statutory stock compensation	-	380,000
Net Deferred Tax Asset	$    658,000	$    3,897,158

The Company’s deferred tax assets, valuation allowance, and change in valuation allowance are as follows:

	Estimated NOL & Timing Differences	Estimated Tax Benefit from Loss	Valuation Allowance	Change in Valuation Allowance	Net Tax Benefit
June 30, 2011	6,063,000	2,273,625	(2,273,625)	(1,461,375)	0
June 30, 2012	6,721,000	2,530,225	(2,530,225)	(256,600)	0

Income taxes at the statutory rate are reconciled to the Company’s actual income taxes as follows:

	June 30, 2012	June 30, 2011
Federal Statutory Rate	34.00%	34.00%
Effects of:
State Income Taxes	5.00%	3.50%
Change in Valuation Allowance	-39.00%	-37.50%
Effective Tax Rate	0.00%	0.00%

Uncertain Tax Positions

The Company has evaluated for uncertain tax positions and determined that there were none as of June 30, 2012 and 2011.

The Company did not recognize any penalties or interest related to uncertain tax positions during the years ended June 30, 2012 and 2011.  No penalties or interest for unrecognized tax benefits had been accrued as of June 30, 2012 and 2011.