Note 7 – Income Taxes

A reconciliation of the federal statutory rate to the effective tax rate reflected in the total provision for income taxes for the nine month periods ended March 31 is as follows:

	2014			2013

Federal statutory rate		34	%		34	%
Exempt income from domestic manufacturer’s deduction		(4)			(3)
Non-deductible expenses:
Adjustment to fair value of contingent earnout liability		4			-
Other		-			2
State taxes		3			-
Effective tax rate		37	%		33	%

ASC 740, “Income Taxes,” requires the Company to review all open tax years in all tax jurisdictions to determine if there are any uncertain income tax positions that require recognition in the Company’s financial statements, including any penalties and interest, based on the “more-likely-than-not” criterion. Based on its review, the Company has concluded that there were no significant income tax positions that would require the recording of additional income taxes or the recognition of any tax benefit in the Company’s financial statements at March 31, 2014 and June 30, 2013. There were no unallocated tax reserves at March 31, 2014 and June 30, 2013. The Company’s federal income tax returns for fiscal years prior to fiscal year 2011 are no longer subject to examination by the Internal Revenue Service.