6. 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, 2015 the Company recorded the tax benefit of losses incurred in the amount of approximately $214,000 and $427,000, respectively. As the realization of the tax benefit of the net operating loss is not assured, an additional valuation allowance of approximately $214,000 and $427,000, net of the effect of the deferred taxes in the amount of $44,000 and ($45,000), for the three and six months ended respectively, was also recorded. As a result of the expiration of tax benefits associated with expiring stock options not previously covered by the valuation allowance, the Company recorded a deferred tax benefit in the amount of approximately $0 and $124,000 for the three and six months ended respectively. For the three and six months ended December 31, 2014, the Company recorded the tax benefit of losses incurred in the amount of $12,000 and $278,000 net of additions to the valuation allowance of like amounts. The total valuation allowance recorded by the Company as of December 31, 2015 and 2014 was approximately $1,677,000 and $1,078,000, respectively. 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.