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Income Taxes
 12 Months Ended
Jun. 30, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

 

Due to the Company’s losses from operations, no provision for income taxes during the years ended June 30, 2015 and 2014. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows at June 30:

 

   2015  2014
       
Deferred tax  assets:          
Net operating loss and credit carryforwards  $33,279,000   $33,098,000 
Intangible assets   6,000    75,000 
Capital loss and R&D credits   1,500,000    1,454,000 
Research development expenses   657,000    639,000 
Inventory   135,000    128,000 
Accrued expenses and other   306,000    —   
           
Gross deferred tax  assets   35,883,000    35,394,000 
Valuation allowance for deferred tax assets   (35,789,000)   (35,136,000)
           
Total deferred tax  assets   94,000    258,000 
Deferred tax liabilities:          
Depreciation and other   (94,000)   (258,000)
Total deferred tax liabilities   (94,000)   (258,000)
Net deferred tax liability  $—     $—   

 

 

The reconciliation of income tax attributable to operations computed at the United States federal statutory tax rates and the actual tax provision of zero results primarily from the change in the valuation allowance.

 

In assessing the potential future recognition of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of approximately $88.4 million prior to the expiration of net operating loss carry-forwards from 2019 through 2035. Based on the level of historical taxable income, management has provided for a valuation adjustment against the deferred tax assets of $35,789,000 at June 30, 2015, a decrease of approximately $653,000 over June 30, 2014.

 

At June 30, 2015, in addition to net operating loss carry forwards, the Company also has research and development credit carry forwards of approximately $1,500,000, of which $38,505 will expire in fiscal 2019. A portion of the net operating loss carry forwards may be subject to certain limitations of the Internal Revenue Code Sections 382 and 383 which would restrict the annual utilization in future periods due principally to changes in ownership in prior periods.

 

The Company has net operating loss carry forwards in China of $622,000 which are expected to be used to offset profits or to expire in fiscal 2016. Subsequent to the utilization or expiration of the net operating loss carry forwards, we will accrue income taxes. The Company’s Chinese subsidiaries are governed by the Income Tax Law of the PRC concerning the privately run and foreign invested enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.