Deferred Tax Benefit

12 Months Ended

Jun. 30, 2013

Notes to Financial Statements

Deferred Tax Benefit

6.     DEFERRED TAX BENEFIT

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components as of June 30, 2013 and 2012:

	2013			2012
Deferred Tax Assets:
NOL Carryforward	$	2,349,100		$	2,207,500
Depreciation		(12,500	)		7,500
R&D Carryforward		300			11,100
Capital Loss Carryforward		12,000			11,800
Accrued Vacation Payable		8,600			6,500
Allowance for Doubtful Accounts		9,700			20,500
Related party accruals		1,000			—
Contribution Carryforward		200			200
Valuation Allowance		(2,368,400	)		(2,265,100	)
Net Deferred Tax Asset	$	—		$	—

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rate of 39% to pretax income from continuing operations for the years ended June 30, 2013 and 2012 due to the following:

	2013			2012
Book Income	$	(130,200	)	$	(224,000	)
Nondeductible expenses		8,700			1,000
Accrued Vacation Payable		(2,200	)		6,000
Allowance for Bad Debt		(10,700	)		16,000
Depreciation		(1,400	)		(4,500	)
Contributed Services		4,700			12,500
R&D Credit		100			4,500
Related party accruals		1,000			—
Valuation Allowance		130,000			188,500
Income Tax Expense	$	—		$	—

At June 30, 2013, the Company had net operating loss carryforwards of approximately $6,023,000, that may be offset against future taxable income from the year 2012 through 2031. No tax benefit has been reported in the June 30, 2013 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.