Note 10. – Income Taxes

Income tax benefit of $2 ($46 federal tax expense and $48 state tax benefit) and income tax benefit of $1,428 ($1,559 federal tax benefit and $131 state tax expense) was recorded for the three months ended September 30, 2013 and 2012, respectively. For the three months ended September 30, 2013, the effective tax rate differed materially from the statutory rate primarily due to the requirements under ASC 740-20, “Intraperiod Tax Allocation” (“ASC 740-20”) that the Company calculate its expected taxes for the fiscal year and apply the result to the current interim quarter without regard to the actual results of the current interim quarter.

At September 30, 2013, the Company had $3,887 of estimated net operating loss carry-forward for federal income tax purposes available for use in future years subject to the limitations of the provisions of Internal Revenue Code Section 382. At September 30, 2013, we have provided a partial valuation allowance against the deferred tax asset so that the net tax asset was $8,093. 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. Activity in the unrecognized tax benefit liability account was as follows from July 1, 2011 through September 30, 2013:


Balance at June 30, 2011	$	37
Reduction for tax positions of prior years		(18	)

Balance at June 30, 2012		19
Additions for tax positions of prior years		218
Reductions for tax positions of prior years		(8	)

Balance at June 30, 2013		229
Reduction for tax positions of prior years		(8	)

Balance at September 30, 2013	$	221