Income Taxes

The Company accounts for income taxes under ASC Topic 740: “Income Taxes.” Under ASC 740, the deferred tax provision is determined using the liability method, whereby deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and income tax bases of assets and liabilities using presently enacted tax rates. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

In the three and six months ended December 31, 2014 the Company recorded the tax benefit of losses incurred in the amount of approximately $12,000 and $278,000, respectively. As the realization of the tax benefit of the net operating loss is not assured an additional valuation allowance of approximately $12,000 and $278,000 for the three and six months ended respectively was also recorded. The total valuation allowance recorded by the Company as of December 31, 2014 was approximately $1,078,000. To the extent that the Company’s losses continue in future quarters, the tax benefit of those losses will be subject to a valuation allowance.