Income Taxes

We file a consolidated federal income tax return in the United States and various combined and separate filings in several state and local jurisdictions.

There were no unrecognized tax benefits nor any accrued interest or penalties associated with unrecognized tax benefits during the years ended June 30, 2015, 2014 and 2013. We believe that we have appropriate support for the income tax positions taken and to be taken on the Company's tax returns and that the accruals for tax liabilities are adequate for all open years based on our assessment of many factors including past experience and interpretations of tax law applied to the facts of each matter. The Company's tax returns are open to audit under the statute of limitations for the years ending June 30, 2012 through June 30, 2014 for federal tax purposes and for the years ended June 30, 2011 through June 30, 2014 for state tax purposes.

The components of our income tax provision (benefit) are as follows:



	June 30, 2015		June 30, 2014		June 30, 2013
Current:
Federal	$	1,413,296	$	386,018	$	857,480
State	608,436		161,168		659,303
Total current income tax provision	2,021,732		547,186		1,516,783
Deferred:
Federal	1,282,059		1,319,727		2,546,495
State	140,430		25,085		(33,517		)
Total deferred income tax provision	1,422,489		1,344,812		2,512,978
	$	3,444,221	$	1,891,998	$	4,029,761

The following table presents the reconciliation of our income taxes calculated at the statutory federal tax rate, currently 34%, to the income tax provision in our financial statements. The effective tax rate for all years is in excess of the statutory rate as a result of state income taxes, primarily in the state of Louisiana, with smaller adjustments related to stock-based compensation and other permanent differences.



	June 30, 2015			June 30, 2014			June 30, 2013
Income tax provision (benefit) computed at the statutory federal rate:	$	2,868,267		$	1,866,366		$	3,623,784
Reconciling items:
State income taxes, net of federal tax benefit	595,708			189,081			413,019
Permanent differences related to stock-based compensation	—			(155,817		)	8,933
Expiring NOLs related to 2004 reverse merger	—			—			600,964
Deferred tax asset valuation adjustment	—			—			(600,964		)
Other permanent differences	(19,754		)	(7,632		)	(15,975		)
Income tax provision	$	3,444,221		$	1,891,998		$	4,029,761

Deferred income taxes primarily represent the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Deferred tax assets and liabilities are classified as either current or noncurrent on the balance sheet based on the classification of the related asset or liability for financial reporting purposes. Deferred tax assets and liabilities not related to specific assets or liabilities on the financial statements are classified according the expected reversal date of the temporary difference or the expected utilization date for tax attribute carryforwards. The change in the NOLs is primarily due to expiring NOLs related to the 2004 reverse merger as well as utilization of NOLs to offset potential current year taxable income. The components of our deferred taxes are detailed in the table below:



	June 30, 2015			June 30, 2014			June 30, 2013
Deferred tax assets:
Non-qualified stock-based compensation	$	173,647		$	134,469		$	774,673
Net operating loss carry-forwards	400,288			427,249			427,249
AMT credit carry-forward*	701,254			701,254			502,466
Other	91,113			165,775			28,170
Gross deferred tax assets	1,366,302			1,428,747			1,732,558
Valuation allowance	(292,446		)	(292,446		)	(292,446		)
Total deferred tax assets	1,073,856			1,136,301			1,440,112
Deferred tax liability:
Oil and natural gas properties	(12,233,993		)	(10,873,949		)	(9,832,948		)
Total deferred tax liability	(12,233,993		)	(10,873,949		)	(9,832,948		)
Net deferred tax liability	$	(11,160,137	)	$	(9,737,648	)	$	(8,392,836	)

_______________________________________________________________________________


*	Total AMT credit carry-forward is $901,545. Our net deferred tax liability does not include $200,291 of AMT credit carry-forward associated with the tax benefit related to stock-based compensation.

As of June 30, 2015, we have a federal tax loss carryforward of approximately $25.8 million, created primarily from tax deductions in excess of book deductions related to the exercise of non-qualified stock options and incentive warrants in fiscal 2014, and $1.2 million of remaining tax loss carryforwards that we acquired through the reverse merger in May 2004. The majority of the tax loss carryforwards from the reverse merger have expired without being utilized. We will be able to utilize a maximum of $0.3 million of these carryforwards in equal annual amounts of $39,648 through 2023 and the balance is not able to be utilized based on the provisions of IRC Section 382. We have recorded a valuation allowance for the portion of our net operating loss that is limited by IRC Section 382.

The remaining fiscal 2014 tax loss carry-forward of $24.6 million and future tax benefits resulting from the fiscal 2014 exercises will not affect our future tax provision for financial reporting purposes, nor are we able to recognize a deferred tax asset for these future benefits. When we receive these tax benefits as a reduction of future cash taxes that would otherwise be payable, we will recognize that benefit as an increase in additional paid in capital.

Based on the carryback of tax losses resulting from the exercise of stock options and incentive warrants in fiscal 2014, we filed a request for refund of cash taxes paid in Louisiana for the previous three fiscal years totaling approximately $1.5 million. This refund will not affect our tax provision for financial reporting purposes. When and if received, we will recognize the benefit as an increase in additional paid-in capital. We cannot be certain of the timing or amount of the refund if any. As a result, this potential refund has not been reflected in the accompanying financial statements. This carryback, if realized, will utilize approximately $19.0 million of an estimated $24.2 million net loss for state tax purposes with another $3.8 million expected to be used to offset taxable income in 2015, leaving $1.5 million of tax loss carryforwards remaining for Louisiana tax purposes.

In addition, as of June 30, 2015, the Company has an estimated carryforward of percentage depletion in excess of basis of approximately $11.6 million. These future deductions are limited to 65% of taxable income in any period.