Note 13. Income Taxes

The Company had no income tax expense due to operating losses incurred for the years ended June 30, 2017 and 2016. 

The provision for/(benefit from) income tax differs from the amount computed by applying the statutory federal income tax rate to income before the provision for/(benefit from) income taxes. The sources and tax effects of the differences are as follows:  

The tax effects of temporary differences that give rise to the Company’s deferred tax assets and liabilities are as follows: 

 At June 30, 2017, the Company had approximately $14,600,000 of Federal and state NOL carryovers that may be available to offset future taxable income.

The NOL carry overs, if not utilized, will expire in stages beginning 2035. 

Based on a history of cumulative losses at the Company and the results of operations for the years ended June 30, 2017 and 2016, the Company determined that it is more likely than not it will not realize benefits from the deferred tax assets. The Company will not record income tax benefits in the financial statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets. As a result of the analysis, the Company determined that a full valuation allowance against the deferred tax assets is required. The net change in the valuation allowance during the year ended June 30, 2017 was an increase of approximately $3,325,000. 

As a result of the reverse merger that occurred on May 22, 2015, the Company’s previous NOL may be significantly limited. The Company has not performed a detailed analysis to determine whether an ownership change under IRC Section 382 or similar rules has occurred. The effect of an ownership change would be the imposition of annual limitation on the use of NOL carryforwards attributable to periods before the change which total approximately $421,000. Any limitation may result in expiration of a portion of the NOL before utilization. The Company recognizes interest and penalties related to uncertain tax positions in selling, general and administrative expenses. The Company has not identified any uncertain tax positions requiring a reserve as of June 30, 2017.