XML 18 R16.htm IDEA: XBRL DOCUMENT

Income Taxes

12 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Income Taxes

Income tax benefit resulting from applying statutory rates in jurisdictions in which Aytu is taxed (Federal and various states) differs from the income tax provision (benefit) in the Aytu financial statements. The following table reflects the reconciliation for the respective periods.

		June 30,
		2019								2018
Benefit at statutory rate			(5,698,000	)			-21.00	%			(2,807,000	)			-12.47	%
State income taxes, net of federal benefit			(1,077,000	)			-3.97	%			(585,000	)			-2.60	%
Stock based compensation			3,000				0.01	%			22,000				0.10	%
Contingent consideration			-				0.00	%			(465,000	)			-2.07	%
Change in tax rate			12,000				0.04	%			(31,000	)			-0.14	%
Remeasurement of deferred taxes			-				0.00	%			6,648,000				29.54	%
Effect of phased-in tax rate			-				0.00	%			891,000				3.96	%
Change in valuation allowance			6,584,000				24.27	%			(2,745,000	)			-12.20	%
Derivative income			(16,000	)			-0.06	%			(1,029,000	)			-4.57	%
Other			192,000				0.72	%			101,000				0.45	%
Net income tax provision (benefit)			-				0.00	%			-				0.00	%

Deferred income taxes arise from temporary differences in the recognition of certain items for income tax and financial reporting purposes. The approximate tax effects of significant temporary differences which comprise the deferred tax assets and liabilities are as follows for the respective periods:

		June 30,
		2019				2018
Deferred tax assets (liabilities):
Accrued expenses			234,000				136,000
Net operating loss carry forward			18,085,000				14,458,000
Intangibles			3,377,000				651,000
Share-based compensation			1,210,000				1,044,000
Fixed assets			86,000				139,000
Capital loss carry forward			203,000				204,000
Contribution carry forward			31,000				29,000
Warrant liability			51,000				53,000
Inventory			25,000				4,000

Total deferred income tax assets			23,302,000				16,718,000
Less: Valuation allowance			(23,302,000	)			(16,718,000	)
Net deferred income tax assets			-				-

In assessing the realizability 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 periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, carry back opportunities and tax planning strategies in making the assessment. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since inception. Such objective evidence limits the ability to consider other subjective evidence such as the Company’s projection for future growth. On the basis of this evaluation the company has recorded a full valuation allowance on its deferred tax assets.

The Company has federal net operating losses of approximately $73.9 million and $59.3 million as of June 30, 2019 and June 30, 2018, respectively that, subject to limitation, may be available in future tax years to offset taxable income. Of the available federal net operating losses, approximately $31.4 million can be carried forward indefinitely while the balance will begin to expire in 2031. The Company has state net operating losses of approximately $63.9 million and $50.3 million as of June 30, 2019 and June 30, 2018, respectively that, subject to limitation, may be available in future tax years to offset taxable income. The available state net operating losses, if not utilized to offset taxable income in future periods, will begin to expire in 2025 through 2038. Under the provisions of the Internal Revenue Code, substantial changes in the Company's ownership may result in limitations on the amount of NOL carryforwards that can be utilized in future years. Net operating loss carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOLs generated as such NOLs are utilized.

As of June 30, 2019 and 2018, the Company has no liability for gross unrecognized tax benefits or related interest and penalties. Aytu has made its best estimates of certain income tax amounts included in the financial statements. Application of the Company’s accounting policies and estimates, however, involves the exercise of judgement and use of assumptions as to future uncertainties and, as a result, could differ from these estimates. In arriving at its estimates, factors the Company considers include how accurate the estimates or assumptions have been in the past, how much the estimates or assumptions have changed and how reasonably likely such changes may have a material impact. Aytu has been historically included in the Ampio consolidated tax return. Under the general statute of limitations, the Company would not be subject to federal or Colorado income tax examinations for tax years prior to 2015 and 2014, respectively. However, given the net operating losses generated since inception, all tax years since inception are subject to examination