Income Taxes

3 Months Ended

Sep. 30, 2012

Income Taxes

Note 12. – Income Taxes

Income tax benefit of $1,428 ($1,559 federal tax benefit and $131 state tax expense) and $1,067 ($960 federal tax benefit and $107 state tax benefit) was recorded for the three months ended September 30, 2012 and 2011, respectively.

We had an estimated net operating loss carry-forward for federal income tax purposes of approximately $5,900 at September 30, 2012. Use of this net operating loss carry-forward is subject to the limitations of the provisions of Internal Revenue Code Section 382. As a result, not all of the net operating loss carry-forward is available to offset federal taxable income in the current year. At September 30, 2012, we have provided a partial valuation allowance against the deferred tax asset so that the net tax asset was $11,149. Based upon management’s assessment that it was more likely than not that a portion of its deferred tax asset (primarily its net operating losses subject to limitation) would not be recovered, the Company established a valuation allowance for the portion of the tax asset which management estimates will not be utilized.

The Company accounts for uncertainty in income taxes for a change in judgment related to prior years’ tax positions in the quarter of such change. The Company classifies interest and penalties related to unrecognized tax benefits as part of its provision for income taxes. Accordingly, included in the liability for unrecognized tax benefits was a liability of $17 as of September 30, 2012.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits, included interest and penalties from July 1, 2010 through September 30, 2012 is presented below:

Balance at July 1, 2010	$	71
Reduction for tax positions of prior years		(34	)
Balance at June 30, 2011		37
Reduction for tax positions of prior years		(18	)
Balance at June 30, 2012		19
Reduction for tax positions of prior years		(2	)
Balance at September 30, 2012	$	17