INCOME TAXES

12 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Text Block]

NOTE 6 - INCOME TAXES

The reconciliation for the 2012, 2011 and 2010 income tax expense (benefit) computed at the U.S. Federal statutory tax rate to the Company's effective income rate is as follows (in percentages):

	June 30,			June 30,			June 30,
	2012			2011			2010
Tax at U.S. Federal statutory rate		34.0			34.0			0.0
State and local taxes, net of federal benefit		5.6			5.6			5.6
Change in valuation allowance		(36.7	)		(36.2	)		(27.6	)
		2.9			3.4			(22.0	)

Significant components of the provision for income tax expense (benefit) from continuing operations are as follows:

	Year Ended			Year Ended			Year Ended
	June 30, 2012			June 30, 2011			June 30, 2010
Current:
Federal	$	564		$	429		$	-
State		93			71			68
		657			500			68
Deferred:
Federal		298			288			270
State		49			48			(23	)
		347			336			247
Decrease in valuation allowance		(937	)		(771	)		(577	)
Net income tax (benefit)	$	65		$	65		$	(262	)

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement purposes and the amounts used for income tax purposes. The significant components of the Company's deferred tax asset are as follows:

	June 30,			June 30,
	2012			2011
Current:
Amortization of intangible assets	$	314		$	314
Accrued liabilities and other		869			686
Net operating losses and other carryforwards		317			500
Noncurrent:
Amortization of intangible assets		2,627			2,946
Depreciation		(27	)		(62	)
Net operating losses and other carryforwards		3,961			4,614
		8,061			8,998
Valuation allowance		(5,311	)		(6,248	)
Total deferred tax assets	$	2,750		$	2,750

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported, if at June 30, 2012, the Company had federal tax operating losses based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

This evidence includes consideration of various uncertainties that management has identified as risk factors to the Company. Recent events, including significant turmoil within the domestic and foreign financial markets, healthcare legislation and increasing unemployment tax rates and taxable wage thresholds, more than likely are expected to contribute to atypical custom attrition and decreased gross profits. Additionally, since the divesture of certain segments in fiscal 2009 unrelated to the Company’s current focus of full service human resources, the Company has had positive results for the last four fiscal periods for financial reporting purposes. However, the Company has not evidenced a similar trend for income tax reporting purposes, experiencing net operating losses in four of prior six fiscal periods, with the current and 2011 fiscal years as the exception. These taxable losses are primarily the result of permanent timing differences related to the amortization of certain intangible assets for income tax purposes through 2022. The Company’s deferred tax assets and liabilities are susceptible to erratic changes due to the inherent unpredictable nature of the Company’s insurance claim liabilities and sensitivity to unemployment and wage volatility. Changes in the economy and federal and state legislature, both favorable and unfavorable, will impact management’s assumptions and estimates in future periods.

After consideration of the evidence, both positive and negative, management has determined that a $5,311 and $6,248 valuation allowance at June 30, 2012 and 2011, respectively, is necessary to reduce the deferred tax assets to the amount that will more likely than not be realized. The change in the valuation allowance is $937 and $771 for the fiscal years ended June 30, 2012 and 2011, respectively. The Company has federal net operating loss carryforwards of approximately $10.8 and $12.3 million at June 30, 2012 and 2011, respectively, which expire between 2021 and 2030. The Company has state net operating loss carryforwards of approximately $11.0 and $12.6 million at June 30, 2012 and 2011, respectively.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of June 30, 2012, 2011 and 2010, the Company made no provisions for interest or penalties related to uncertain tax positions. The tax years beginning July 1, 2008 through July 1, 2011 remain open to examination by the Internal Revenue Service of the United States.