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Income Taxes

12 Months Ended

Jun. 30, 2014

8. Income Taxes

Our NOL 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.

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, 2013. 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.

Net deferred tax assets consist of the following components as of June 30, 2014 and 2013:


		2014		2013
Deferred tax assets:
NOL carryover	$	11,187,465	$	10,431,855
Valuation allowance		(11,187,465)		(10,431,855)
Net deferred tax asset	$	-	$	-

The income tax provision is summarized as follows:


	2014		2013
Federal income tax benefit, net of state	$	(234,197)	$	(3,551,149)
State income tax benefit		(66,796)		-
Valuation allowance		300,993		3,551,149
	$	-	$	-

At June 30, 2014, the Company had net operating loss carry forwards of approximately $11 million that may be offset against future taxable income through 2024. No tax benefit has been reported in the June 30, 2014 and 2013 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.

We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material change to our financial position. Therefore, no reserves for uncertain income tax position have been recorded pursuant to ASC 740.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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