Note 7 - Income Taxes

9 Months Ended

Mar. 31, 2012

Income Tax Disclosure [Text Block]

7.  Income Taxes

Income taxes are accounted for under the liability method, under which deferred tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse.  A valuation allowance against the net deferred tax assets is recorded if based upon the weight of available evidence it is more likely than not that some or all of the deferred tax assets will not be realized.  The Company records liabilities for income tax contingencies if it is probable that the Company has incurred a tax liability and the liability or range of loss can be reasonably estimated.

During the last fiscal quarter, management completed an evaluation of its deferred tax assets and its offsetting valuation allowance and concluded that the Company will retain its full valuation allowance until the Company establishes a longer trend of profitable operations.  While the Company was profitable in the prior fiscal year and has continued to be profitable in the current fiscal year, we believe the 18 months of profits did not provide sufficient history of profitable operations to support the release of any of the calculated reserve.   An evaluation will be conducted again at fiscal year-end based on updated operating results, the overall economy and the state of our marketplace at that time.

The Company believes that its income tax filing positions taken or expected to be taken in its tax returns will more likely than not be sustained upon audit by the taxing authorities and does not anticipate any adjustments that will result in a material adverse impact on the Company’s financial condition, results of operations, or cash flow.  Therefore, no reserves for uncertain income tax positions have been recorded.