Note 5.

Income Taxes

On a quarterly basis, the Company estimates what its effective tax rate will be for the full fiscal year and records a quarterly income tax provision based on the anticipated rate. As the year progresses, the Company refines its estimate based on the facts and circumstances by each tax jurisdiction. The effective tax rate for the three months ended September 30, 2014 and 2013 was 0.0% and 43.4%, respectively. For the three months ended September 30, 2014, the Company recorded zero tax expense. As income is earned the Companys net operating loss carryforward is applied to reduce taxable income to zero. Accordingly, the application of the net operating losses to reduce taxable income reduces the Companys gross deferred tax assets. This reduction of the Companys gross deferred tax assets will cause a corresponding decrease in respective valuation allowance. For the three months ended September 30, 2014, the Company recorded an income tax expense of zero and the decrease in the Companys deferred tax assets and corresponding reduction in its deferred tax asset valuation allowance would be approximately $155,000.

During fiscal 2014 the Company recorded a full valuation allowance against all of its net US federal and state deferred tax assets. The Company assessed whether a valuation allowance should be established against its deferred tax assets based on consideration of all available evidence, using a more likely than not standard.In assessing the need for a valuation allowance, the Company considered both positive and negative evidence related to the likelihood of realization of deferred tax assets.In making such assessments, more weight was given to evidence that could be objectively verified. Under this approach the recent cumulative losses is a significant piece of significant negative evidence. This factor impairs the Companys ability to rely on future taxable income projections in determining whether a valuation allowance is appropriate.Future sources of taxable income considered in determining the amount of recorded valuation allowance include:


		Taxable income in prior carryback years, if carryback is permitted under the tax law;

		Future reversals of existingtaxable temporary differences, excluding those related to indefinite-lived intangible assets;

		Tax planning strategies; and

		Future taxable income exclusive of reversing temporary differences and carryforwards.

On a quarterly basis, the Company evaluates all positive and negative evidence, as discussed above, in determining if the valuation allowance is fairly stated. Based the Companys review of this evidence, management believes that a full valuation allowance against all of the Companys deferred tax assets at September30, 2014 is appropriate.