The Company did not incur any income tax expense for the three and nine months ended March 31, 2014. At March 31, 2014, $4,875,422 of federal and state tax assets arising from net operating losses were available to the Company to offset future taxable income, which will expire in 2033. Given the short history of the Company and the uncertainty as to the likelihood of future taxable income, the Company has recorded a 100% valuation reserve against the anticipated recovery from the use of the net operating losses created at the inception or generated thereafter. The Company will evaluate the appropriateness of the valuation allowance on an annual basis and adjust the allowance as considered necessary.

The Company’s effective tax rate differs from the federal statutory rate of 34% primarily due to the impact of state income taxes and the valuation allowance recorded against its deferred tax assets.

	March 31, 2014
Statutory rate		34.0	%
State income taxes		5.8	%
Permanent differences		2.3	%
Valuation allowance		(42.5	)%
Other		0.4	%
Total		0.0	%

The principal components of deferred tax assets and (liabilities) are as follows as of March 31, 2014 and June 30, 2013 on a tax effected basis:

	March 31, 2014			June 30, 2013
Net operating losses carryforward	$	4,197,125		$	2,002,842
Start-up costs and fixed assets, net of amortization		120,011			60,005
Property and equipment		159,025			56,270
Stock based compensation		399,261			192,786
Gross deferred taxes	$	4,875,422		$	2,311,903
Valuation allowance		(4,875,422	)		(2,311,903	)
Net deferred taxes	$	-		$	-

The Company follows the provisions of FASB ASC Subtopic 740-10-65-1, Income Taxes. As of March 31, 2014 and June 30, 2013, respectively, the Company did not recognize any liability for unrecognized tax benefits.

Section 382 of the Internal Revenue Code can limit the amount of net operating losses, which may be utilized if certain changes to a company’s ownership occur. While the Company underwent a shift in ownership in 2013 as defined by Section 382 of the Internal Revenue Code, the Company has not incurred any limitations on its ability to utilize its net operating losses under Section 382 of the Internal Revenue Code, it may incur limitations in the future if there is a change in ownership.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. No such interest or penalties were recognized during the period presented. The Company had no accruals for interest and penalties at March 31, 2014. There are no income tax examinations currently in process and as of the date of this report.