Income Taxes

12 Months Ended

Jun. 30, 2012

Income Taxes [Abstract]

Income Taxes

Note 6 — Income Taxes

As of June 30, 2012, the Company had a net operating loss (“NOL”) carry-forward of approximately $5,445,000. The NOL may be offset against future taxable income, if any, through the year ended June 30, 2030. A portion of the NOL carryforward begins to expire in 2024, is subject to review by the Internal Revenue Service, and is subject to U.S. Internal Revenue Code Section 382 limitations. The income tax expense (benefit) for the years ended June 30, 2012 and 2011 consists of the following:

	2012			2011
Income / (Loss) Before Income Taxes:
Domestic	$	14,557,000		$	(50,534,720	)
International		116,000			(165,030	)
	$	14,673,000		$	(50,699,750	)
Current Taxes
Federal	$	3,758,000		$	—
State		1,121,000			92,000
Foreign		47,000			—
Total Current Income Tax Provision	$	4,926,000		$	92,000
Deferred Taxes
Federal		(2,110,000	)		—
State		(602,000	)		—
Foreign		(12,000	)		—
Total Deferred Income Tax Provision	$	(2,724,000	)	$	—
Net Income Tax Provision	$	2,202,000		$	92,000

The effective income tax rate for the years ended June 30, 2012 and 2011 differs from the U.S. Federal statutory income tax rate due to the following:

	2012			2011
Federal statutory income tax rate		35.00	%		(34.00	%)
State income taxes, net of federal benefit		5.50	%		.24	%
Tax return to provision true-up		(1.01	)%		(1.35	%)
Permanent differences:
— interest on convertible debt		0.00	%		3.44	%
— change in derivative liability		16.14	%		32.44	%
— stock option compensation		0.30	%		.21	%
— other		0.44	%		0.12	%
Decrease in valuation allowance		(39.45	)%		(0.91	%)
Net income tax provision (benefit)		16.04	%		(0.18	%)

The components of the deferred tax assets and liabilities as of June 30, 2012 and 2011 are as follows:

	2012			2011
Deferred tax assets:
Federal and state net operating loss carryovers	$	2,453,000		$	4,832,000
Research and development tax credits		—			31,000
Contribution carryover		—			13,000
Stock option compensation		988,000			722,000
Accrued vacation, allowance for returns, bonuses & other		600,000			540,000
Deferred tax asset	$	4,041,000		$	6,138,000
Deferred liabilities
Patents and trademarks		(587,000	)		(625,000	)
Change in tax accounting methods		(44,000	)		(36,000	)
Property & equipment		(540,000	)		(6,000	)
Total deferred liabilities		(1,171,000	)		(667,000	)
Net deferred tax asset		2,870,000			5,471,000
Less: valuation allowance		(147,000	)		(5,471,000	)
Deferred tax assets	$	2,723,000		$	—

The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position, and the measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition of the benefit. We believe the Company has no material uncertain tax positions and do not expect significant changes in the amount of unrecognized tax benefits that may occur within the next twelve months. Accordingly, we have not reserved for interest or penalties. The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2009 through present and the open tax years by state tax authorities include returns for fiscal years June 30, 2008 through present. In addition, the IRS and state tax authorities may examine NOLs for any previous years if utilized by the Company.

The total recognized tax benefit from settlement of stock based awards for the period ending June 30, 2011 was $579,000.