v3.5.0.2
10. INCOME TAXES
 12 Months Ended
Jun. 30, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES

A reconciliation of anticipated statutory rates is as follows:

 

    2016   2015
         
Statutory rate   34.0%   34.0%
State income taxes, net of federal income        
   tax benefit   5.0%   5.0%
Change in valuation allowance related to net        
   operating loss carry-forwards and change        
   in temporary differences   -39.0%   -39.0%
         
    0.0%   0.0%

 

The components of the net deferred tax asset (liability) recognized as of June 30, 2016 and 2015 are as follows: 

 

    2016     2015
Deferred tax asset $        12,100,000   $      11,800,000
Less: estimated Section 382 adjustment          (4,000,000)           (4,000,000)
     Net operating loss and capital loss carryforwards   8,100,000     7,800,000
     Less: Valuation allowance   (8,100,000)     (7,800,000)
           
Net deferred tax $                       -      $                     -   

 

A valuation allowance is recognized if it is more likely than not that some or all of the deferred income tax assets will not be realized. A valuation allowance is used to offset the related income tax assets due to uncertainties of realizing the benefits of certain net operating loss and tax credits. The valuation allowance, which reflects a 100% reserve for all years reported above, increased $300,000 from June 30, 2015 to June 30, 2016 primarily due to the expiration of state operating loss carryforwards. At June 30, 2016, the Company had net operating loss carry-forwards for federal tax purposes of approximately $34,900,000. The loss carry-forwards, unless utilized, will expire from 2018 through 2035. With few exceptions, the Company is no longer subject to U.S. federal, state and local examinations by tax authorities for years before 2011.

 

Internal Revenue Code Section 382 limits the ability to utilize net operating losses if a 50% change in ownership occurs over a three year period. Such limitation of the net operating losses may have occurred which the Company has not fully analyzed at this time as the deferred tax asset is fully reserved, however, the Company has estimated a limitation effect on deferred tax assets of approximately $4 million at June 30, 2016 and 2015.