Note 5 - Income Taxes

6 Months Ended

Dec. 31, 2011

Income Tax Disclosure [Text Block]

NOTE 5:INCOME TAXES  

The provision (benefit) for income taxes from continuing operations is comprised of the following:

	Six Months Ended			Year Ended June 30,
	December 31, 2011			2011		2010			2009
Current:
Federal	$	-		$	-	$	(4,825	)	$	(6,800	)
State		30			68		57			(133	)
	$	30			68		(4,768	)		(6,933	)
Deferred:
Federal		(6,750	)		-		-			(8,815	)
State		(1,586	)		-		-			2,960
		(8,336	)		-		-			(5,855	)
Total	$	(8,306	)	$	68	$	(4,768	)	$	(12,788	)

A reconciliation of the provision for income taxes from continuing operations at the normal statutory federal rate to the provision included in the accompanying consolidated statements of operations is shown below:

	Six Months Ended			Year Ended June 30,
Periods ended,	December 31, 2011			2011			2010			2009
“Expected” provision at federal statutory rate	$	812		$	(463	)	$	1,387		$	(28,598	)
State income taxes		111			(45	)		156			(3,801	)
State tax credits		-			-			-			(107	)
Bargain purchase gain		(4,985	)		-			-
Change in valuation allowance		(4,263	)		204			(6,311	)		19,818
Change due to state rate change		-			320			-			-
Other		19			52			-			(100	)
Provision for income taxes	$	(8,306	)	$	68		$	(4,768	)	$	(12,788	)
Effective tax rate		(358.2	)%		(5.5	%)		(120.1	%)		15.6	%

As a result of the deferred tax liabilities that were recorded on the acquired assets from the acquisition of LDI’s Distillery Business, which closed during the six month transition period ended December 31, 2011, the Company believes it is more likely than not that it will be able to utilize additional income tax benefits from its existing deferred tax assets that were previously offset by a valuation allowance.  As the resulting valuation allowance release of $4,263 relates to the Company's existing deferred tax assets, the release has been recorded as an income tax benefit outside of the business combination.  The Company continues to maintain a full valuation allowance against its net deferred tax assets as of December 31, 2011.

The tax effects of temporary differences related to deferred income taxes shown on the consolidated balance sheets are as follows:

	December 31, 2011			June 30, 2011			June 30, 2010
Deferred income tax assets:
Post-retirement liability	$	2,520		$	2,595		$	3,181
Deferred income		1,676			1,796			2,094
Stock based compensation		1,579			1,558			1,396
Federal operating loss carry-forwards		15,788			11,214			12,099
Capital loss carryforward		2,045			-			-
State tax credits		3,022			3,022			3,020
State operating loss carry-forwards		8,427			6,858			6,907
Other		4,833			3,947			4,271
Less:  valuation allowance		(9,840	)		(13,675	)		(14,600	)
Gross deferred income tax assets		30,050			17,315			18,368
Deferred income tax liabilities:
Fixed assets		(21,860	)		(10,878	)		(11,686	)
Joint venture investment		(1.999	)		(1,939	)		(1,736	)
Other		(6,191	)		(4,498	)		(4,946	)
Gross deferred income tax liabilities		(30,050	)		(17,315	)		(18,368	)
Net deferred income tax liability	$	-		$	-		$	-

The Company establishes a valuation allowance against certain deferred income tax assets if management believes, based on its assessment of historical and projected operating results and other available facts and circumstances, that it is  more-likely-than-not that all or a portion of the deferred income tax assets will not be realized.  Management reassessed the need for a valuation allowance for its deferred income tax assets.  It was determined that a valuation allowance was appropriate on its net deferred income tax assets for all periods presented.

As of December 31, 2011, the Company had approximately $45,108 and $103,916 of federal and state net operating loss carry-forwards, respectively.  The federal net operating loss will expire as follows:  $28,250 will expire before the end of calendar year 2028, and $16,858 will expire before the end of calendar year 2031.  Due to varying state carry-forward periods, the state net operating losses will expire between calendar years 2012 and 2031.  The Company has a capital loss carry-forward of $5,120 as of December 31, 2011, of which $1,792 and $3,328 will expire at the end of calendar years 2015 and 2016, respectively.  The Company also has state tax credit carry-forwards of approximately $3,022.  The state tax credits will expire in varying periods through calendar year 2021.

The Company elected to change its fiscal year for income tax purposes to December 31 to conform with the change in its financial accounting year.

As of December 31, 2011, the total gross amount of unrecognized tax benefits (excluding interest and penalties) was $445, of which $29 would impact the effective tax rate, if recognized.  As of June 30, 2011, the total gross amount of unrecognized tax benefits (excluding interest and penalties) was $414, of which $29 would impact the effective tax rate, if recognized.  As of June 30, 2010, the total gross amount of unrecognized tax benefits (excluding interest and penalties) was $365, of which $29 would impact the effective rate, if recognized.  As of June 30, 2009, the total gross amount of unrecognized tax benefits (excluding interest and penalties) was $124, all of which would impact the effective rate, if recognized.

The Company has elected to treat interest and penalties related to tax liabilities as a component of income tax expense.  During the six months ended December 31, 2011, and for all years presented, the Company’s activity in accrued interest and penalties was not significant.

The following is a reconciliation of the total amount of unrecognized tax benefits (excluding interest and penalties) for the six months ended December 31, 2011 and for the fiscal years ended June 30, 2011, 2010 and 2009:

	Six Months Ended			Year Ended June 30,
	December 31,  2011			2011		2010		2009
Beginning of period balance	$	414		$	365	$	124	$	1,053
Additions for tax positions of prior years					13		228		-
Decreases for tax positions of prior years		(1	)		-		-		(647	)
Additions for tax positions of the current year		32			36		13		92
Settlements with taxing authorities					-		-		-
Lapse of applicable statute of limitations					-		-		(374	)
End of period balance	$	445		$	414	$	365	$	124

The Company does not expect a significant change in the amount of unrecognized tax benefits in the next twelve months.

The Company’s federal returns for the fiscal years ended June 30, 2004 through June 30, 2011, and the short period ended December 31, 2011 are open to examination as a result of the 5-year net operating loss carry-back claim filed for the fiscal year ended June 30, 2009.  The amount of income taxes that the Company pays is subject to ongoing audits by federal and state taxing authorities.  The Company was under joint committee review by the IRS for its tax year ended June 30, 2009, which was completed during the fiscal year ended June 30, 2011.  The Company’s state income tax returns for the fiscal years ended June 30, 2008 through June 30, 2011 and calendar year ended December 31, 2011 remain open to examination by multiple jurisdictions.