(9) Income Taxes

12 Months Ended

Jun. 30, 2014

Notes

(9) Income Taxes

(9)     Income Taxes

Income tax benefit (provision) for the years ended June 30 consists of:

			Current	Deferred	Total
2014:
	U.S. federal	$	-	107,439	107,439
	State and local		-	18,584	18,584
		$	-	126,023	126,023
2013:
	U.S. federal	$	-	83,198	83,198
	State and local		-	3,556	3,556
		$	-	86,754	86,754

The actual income tax benefit (provision) differs from the “expected” tax benefit (provision) computed by applying the U.S. federal corporate income tax rate of 34% to income (loss) before income taxes for the years ended June 30, are as follows:

		2014	2013
Expected tax benefit (provision)	$	135,036	44,583
State taxes, net of federal tax benefit		12,265	2,359
R&D tax credit		-	55,000
Incentive stock options		(4,852)	(10,213)
Other, net		(16,426)	(4,975)
	$	126,023	86,754

Deferred income tax assets and liabilities related to the tax effects of temporary differences are as follow as of June 30:

			2014	2013
Net deferred income tax assets – current:
	Inventory capitalization for income tax purposes	$	68,748	72,058
	Inventory reserve		130,788	127,732
	Warranty reserve		61,524	69,477
	Accrued product liability		20,970	23,228
	Allowance for doubtful accounts		126,889	96,606
Total deferred income tax assets – current		$	408,919	389,101

			2014	2013
Net deferred income tax assets (liabilities) – non-current:
	Property and equipment, principally due to differences in depreciation	$	(255,835)	(262,726)
	Research and development credit carryover		370,757	383,226
	Other intangibles		(91,822)	(109,231)
	Operating loss carry forwards		280,544	186,172
Total deferred income tax assets (liabilities) – non-current		$	303,644	197,441

In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the years in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred income tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences.

The Company has available at June 30, 2014 and 2013 estimated federal and state net operating loss (“NOL”) carry forwards of $745,605 and $974,484, respectively. The federal NOL will expire in 2030.  The state NOLs will expire depending upon the various rules in the states in which the Company operates. 

The Company’s federal and state income tax returns for June 30, 2011, 2012 and 2013 are open tax years.