Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.0.8
Income Taxes
 12 Months Ended
Jun. 30, 2013
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
14.
Income Taxes
 
The components of the provision for income taxes consist of the following (in thousands):
 
 
 
For the Years Ended
June 30,
 
 
 
2013
 
2012
 
Current - Federal and state
 
$
-
 
$
-
 
Deferred - Federal
 
 
(2,447)
 
 
(2,802)
 
Deferred - State
 
 
(366)
 
 
(417)
 
Total
 
 
(2,813)
 
 
(3,219)
 
Change in valuation allowance
 
 
2,813
 
 
3,219
 
Income tax expense
 
$
-
 
$
-
 
 
The Company has deferred income taxes due to income tax credits, net operating loss carryforwards, and the effect of temporary differences between the carrying values of certain assets and liabilities for financial reporting and income tax purposes.
 
The components of the Company’s deferred tax assets and liabilities are as follows (in thousands): 
 
 
 
As of June 30,
 
 
 
2013
 
2012
 
Deferred tax assets (liabilities):
 
 
 
 
 
 
 
Net operating loss
 
$
10,856
 
$
8,532
 
Share-based compensation
 
 
3,198
 
 
2,682
 
Research and development tax credits
 
 
737
 
 
400
 
Accounts payable amounts not currently deductible
 
 
-
 
 
140
 
Intangible assets
 
 
(56)
 
 
172
 
Vacation accrual
 
 
18
 
 
14
 
Other
 
 
-
 
 
-
 
Valuation allowance
 
 
(14,753)
 
 
(11,940)
 
Total
 
$
-
 
$
-
 
 
The Company has a valuation allowance against the full amount of its net deferred tax assets due to the uncertainty of realization of the deferred tax assets due to operating loss history of the Company. The Company currently provides a valuation allowance against deferred taxes when it is more likely than not that some portion, or all of its deferred tax assets will not be realized. The valuation allowance could be reduced or eliminated based on future earnings and future estimates of taxable income.
 
Federal net operating losses of approximately $5.5 million were used by the Former Parent prior to June 30, 2008 and are not available to the Company. The Former Parent allocated the use of the Federal net operating losses available for use on its consolidated Federal tax return on a pro rata basis based on all of the available net operating losses from all the entities included in its control group.
 
Federal and state net operating losses of approximately $28.9 and $17.7 million, respectively, are available to the Company as of June 30, 2013 and will expire at various dates through 2033. These carryforwards could be subject to certain limitations in the event there is a change in control of the Company pursuant to Internal Revenue Code Section 382, though the Company has not performed a study to determine if the loss carryforwards are subject to these Section 382 limitations. The Company has a research and development credit of approximately $737,000 at June 30, 2013.
 
A reconciliation of the statutory tax rate to the effective tax rate is as follows:
 
 
 
Years Ended
June 30,
 
 
 
2013
 
 
2012
 
Statutory Federal income tax rate
 
 
34
%
 
 
34
%
State (net of Federal benefit)
 
 
6
%
 
 
6
%
Non-deductible expenses - change in fair value of derivative financial liability
 
 
3
%
 
 
26
%
Research and development tax credit
 
 
4
%
 
 
7
%
Non utilization of state operating loss (1)
 
 
-
 
 
 
(12)
%
Other
 
 
(2)
%
 
 
(4)
%
Change in valuation allowance
 
 
(45)
%
 
 
(57)
%
Effective income tax rate
 
 
0
%
 
 
0
%
 
(1) During the year ended June 30, 2012, the Company ceased doing business in a state and received a tax clearance. As a result, the cumulative net operating losses are not being recognized in the audited financial statements.
 
The Company has not been audited by the Internal Revenue Service or any states in connection with income taxes. The Company files federal and state income tax returns subject to varying statutes of limitations. The 2008 through 2012 tax returns generally remain open to examination by federal and state tax authorities.