6. Income taxes

12 Months Ended

Jun. 30, 2012

Income Tax Disclosure [Abstract]

6. Income taxes

Our provisions for income taxes for the years ended June 30, 2012 and 2011, respectively, were as follows (using our blended effective Federal and State income tax rate of 40.3%):

	2012		2011
Current Tax Provision:
Federal and state
Taxable income	$	-	$	-
Total current tax provision	$	-	$	-
Deferred Tax Provision:
Federal and state
Net loss carryforwards	$	(7,836,000)	$	(3,719,000)
Change in valuation allowance		7,836,000		3,719,000
Total deferred tax provision	$	-	$	-

Deferred tax assets at June 30, 2012 and 2011 consisted of the following:

			2012		2011
Deferred tax assets:
	Net operating loss carryforwards	$	3,158,000	$	1,499,000
Valuation allowance			(3,158,000)		(1,499,000)
Net deferred tax assets		$	-	$	-

Internal Revenue Code Section 382 and similar California rules place a limitation on the amount of taxable income that can be offset by net operating loss carryforwards (“NOL”) after a change in control (generally greater than a 50% change in ownership).  Transactions such as planned future sales of our common stock may be included in determining such a change in control.  These factors give rise to uncertainty as to whether the net deferred tax assets are realizable.  We have approximately $7,836,000 in NOL at June 30, 2012 that will begin to expire in 2024 for federal and state purposes and could be limited for use under IRC Section 382.  We have recorded a valuation allowance against the entire net deferred tax asset balance due because we believe there exists a substantial doubt that we will be able to realize the benefits due to our lack of a history of earnings and due to possible limitations under IRC Section 382.    A reconciliation of the expected tax benefit computed at the U.S. federal and state statutory income tax rates to our tax benefit for the years ended June 30, 2012 and 2011 is as follows:

	Years ended June 30,
		2012				2011
Federal income tax rate at 34%	$		(2,664,000)	34.0  %	$		(1,265,000)	34.0  %
State income tax, net of federal benefit			(494,000)	6.3  %			(234,000)	6.3  %
Change in valuation allowance			3,158,000	(40.3) %			1,499,000	(40.3) %
Benefit for income taxes	$		-	-  %	$		-	-  %

We file income tax returns in the U.S. and in the state of California with varying statutes of limitations.  Our policy is to recognize interest expense and penalties related to income tax matters as a component of our provision for income taxes.  There were no accrued interest and penalties associated with uncertain tax positions as of June 30, 2012.  All operations are in California and the Company

believes it has no tax positions which could more-likely-than not be challenged by tax authorities. We have no unrecognized tax benefits and thus no interest or penalties included in the financial statements.