Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v2.4.0.6
INCOME TAXES
 12 Months Ended
Jun. 30, 2012
Income Tax Disclosure [Text Block]

NOTE H – INCOME TAXES


The components of the Company’s deferred tax assets are as follows:


 

 

 

 

 

 

 

 

 

 

As of June 30,

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred tax assets:

 

 

 

 

 

 

 

Net operating loss

 

$

8,532,000

 

$

6,217,000

 

Stock-based compensation

 

 

2,682,000

 

 

1,622,000

 

Research and development tax credits

 

 

400,000

 

 

—

 

Accounts payable amounts not currently deductible

 

 

140,000

 

 

632,000

 

Intangible assets – impairment

 

 

172,000

 

 

234,000

 

Vacation accrual

 

 

14,000

 

 

9,000

 

Other

 

 

 —

 

 

7,000

 

Valuation allowance

 

 

(11,940,000

)

 

(8,721,000

)

 

 

 

 

Total

 

$

—

 

$

—

 

 

 

 

 


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 $23.2 and $5.7 million, respectively, are available to the Company as of June 30, 2012 and will expire at various dates through 2032. These carryforwards could be subject to certain limitations in the event there is a change in control, pursuant to Internal Revenue Code Section 382, of the Company and have been fully reserved in the Company’s valuation allowance account as there is substantial doubt the Company and the Former Parent would be able use these net operating losses to offset future taxable income before the net operating losses expire and the Company or the Former Parent is able to realize the related benefit. The Company has a research and development credit of approximately $400,000 at June 30, 2012.


The components of the provision for income taxes consist of the following:


 

 

 

 

 

 

 

 

 

 

For the Years Ended June 30,

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

Current - Federal and state

 

$

—

 

$

—

 

Deferred - Federal

 

 

(2,802,000

)

 

(4,128,000

)

Deferred - state

 

 

(417,000

)

 

(192,000

)

 

 

 

 

Total

 

 

(3,219,000

)

 

(4,320,000

)

Change in valuation allowance

 

 

3,219,000

 

 

4,320,000

 

 

 

 

 

Income tax expense

 

$

—

 

$

—

 

 

 

 

 


A reconciliation of the statutory tax rate to the effective tax rate is as follows:


 

 

 

 

 

 

 

 

 

Years Ended June 30,

 

 

 

 

 

 

2012

 

2011

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

26

%

 

(7

%)

Research and development tax credit

 

 

7

%

 

—

Non utilization of state operating loss (1)

   

(12

%)

 

—

 

Other

 

 

(4

%)

 

(3

%)

Change in valuation allowance

 

 

(57

%)

 

(30

%)

 

 

 

 

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.