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Income Taxes | 12 Months Ended
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Jun. 30, 2012
Income Taxes |
Income Taxes |
Note 10 — Income Taxes We file a consolidated federal income tax return in the United States and various combined and separate filings in several state and local jurisdictions. There were no unrecognized tax benefits nor any accrued interest or penalties associated with unrecognized tax benefits during the year ended June 30, 2012, 2011 and 2010. We believe that we have appropriate support for the income tax positions taken and to be taken on the Company’s tax returns and that the accruals for tax liabilities are adequate for all open years based on our assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. The Company’s tax returns are open to audit under the statute of limitations for the years ending June 30, 2008 through June 30, 2011 for federal tax purposes and for the years ended June 30, 2008 through June 30, 2011 for state tax purposes. As a result of our net operating losses during the tax years ended June 30, 2010, 2009, and 2008, and the refunds we claimed as a result of our carry backs of those losses to our tax years ended June 30, 2006 and 2007, we are under a limited scope IRS audit. The IRS limited scope audit is pending joint committee review. We do not expect that the limited scope audit will have a significant effect on our financial condition and results of operations. The components of our income tax provision (benefit) are as follows:
|  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2010 |
Current: |  |  |  |  |  |  |
Federal |  | $ | 309,632 |  | $ | (64,068 | ) | $ | (608,339 | )
State |  | 841,698 |  | 132,596 |  | 207,952 |
Total current income tax provision (benefit) |  | 1,151,330 |  | 68,528 |  | (400,387 | )
Deferred: |  |  |  |  |  |  |
Federal |  | 2,542,662 |  | 360,174 |  | (553,326 | )
State |  | 6,930 |  | 20,212 |  | (218,111 | )
Total deferred income tax provision (benefit) |  | 2,549,592 |  | 380,386 |  | (771,437 | )
Total income tax provision (benefit) |  | $ | 3,700,922 |  | $ | 448,914 |  | $ | (1,171,824 | )
The 2012 effective tax rate is in excess of the federal statutory rate primarily due to the incentive based stock compensation and increased Louisiana state income tax (due to the increased Delhi revenue). The 2011 effective rate is well in excess of the federal statutory rate primarily due to the reversal of permanent deductions take in prior years that were recomputed as a result of the federal NOL carryback claims as well as incentive based stock compensation. The rate appears abnormally high as a result of the fixed dollar nature of the permanent items in relation to the nearly breakeven pretax book income. The 2010 effective tax rate is slightly below the federal statutory rate primarily due to a pretax book loss offset by a permanent addition for incentive based stock compensation. The following is a reconciliation of statutory income tax expense to our income tax provision (benefit):
|  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2010 |
Income tax provision (benefit) computed at the statutory federal rate: |  | $ | 3,003,238 |  | $ | 70,503 |  | $ | (1,210,241 | )
Reconciling items: |  |  |  |  |  |  |
State income taxes, net of federal tax benefit |  | 560,095 |  | 100,853 |  | (10,413 | )
Stock-based compensation (primarily incentive stock options) |  | 83,115 |  | 140,620 |  | 105,402 |
Expiring NOLs related to 2004 reverse merger |  | 4,348,495 |  |  |  |  |
Deferred tax asset valuation adjustment |  | (4,348,495 | ) | — |  | — |
Reversal of Section 199 deductions as a result of carry-backs |  | — |  | 141,920 |  | — |
Rate adjustment |  | — |  | (7,172 | ) | (42,651 | )
Other |  | 54,474 |  | 2,190 |  | (13,921 | )
Income tax provision (benefit) |  | $ | 3,700,922 |  | $ | 448,914 |  | $ | (1,171,824 | )
Deferred income taxes primarily represent the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are classified as either current or noncurrent on the balance sheet based on the classification of the related asset or liability for financial reporting purposes. Deferred tax assets and liabilities not related to specific assets or liabilities on the financial statements are classified according the expected reversal date of the temporary difference or the expected utilization date for tax attribute carryforwards. The change in the NOL is primarily due to expiring NOLs related to the 2004 reverse merger as well as utilization of NOL to offset potential current year taxable income. The components of our deferred taxes are detailed in the table below:
|  | June 30, 2012 |  | June 30, 2011 |  | June 30, 2010 |
Deferred tax assets: |  |  |  |  |  |  |
Non-qualified stock-based compensation |  | $ | 774,720 |  | $ | 959,547 |  | $ | 866,035 |
Net operating loss carry-forwards** |  | 1,336,769 |  | 5,910,275 |  | 5,389,065 |
AMT credit carry-forward* |  | 714,571 |  | 682,456 |  | 645,938 |
Other |  | 29,929 |  | 23,626 |  | 21,306 |
Gross deferred tax assets |  | 2,855,989 |  | 7,575,904 |  | 6,922,344 |
Valuation allowance |  | (893,410 | ) | (5,187,983 | ) | (5,187,983 | )
Total deferred tax assets |  | 1,962,579 |  | 2,387,921 |  | 1,734,361 |
Deferred tax liability: |  |  |  |  |  |  |
Oil and natural gas properties |  | (7,842,437 | ) | (5,718,187 | ) | (4,684,241 | )
Total deferred tax liability |  | (7,842,437 | ) | (5,718,187 | ) | (4,684,241 | )
Net deferred tax liability |  | $ | (5,879,858 | ) | $ | (3,330,266 | ) | $ | (2,949,880 | )
* Total AMT credit carry-forward is $844,440. Our net deferred tax liability does not include $129,869 of AMT credit carry-forward associated with the windfall tax benefit. ** Excluded from our net tax liability is an estimated tax benefit of $394,487 related to net operating losses associated windfall tax benefits. We recovered approximately $1.0 million in federal income taxes as a result of the carry-back of tax losses incurred during June 30, 2010. The loss carry-back was primarily the result of significant intangible drilling costs incurred during that year, which we deducted for federal income tax purposes. At June 30, 2012, we have a federal tax loss carry-forward of approximately $3.9 million, exclusive of the $1.1 million non-benefitted NOL related to unutilized windfall tax benefits. Included in the deferral tax loss carry-forward is approximately $3.1 million that we acquired through the reverse merger in May 2004, of which, approximately $0.4 million is available to us to use in equal amounts through 2023. We have applied a valuation allowance against the portion of the federal tax loss carry-forward that has been disallowed through IRC Section 382.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 136, 172 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=6881521&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 109 -Paragraph 43, 44, 45, 46, 47, 48, 49 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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