IsoRay, Inc.

12.

Income Taxes

Due to net losses, the Company did not record an income tax provision or benefit for the years ending June 30, 2017, 2016 and 2015.

The significant deferred tax components using a 35% federal income tax rate for the years ended June 30, 2017 and 2016 are as follows (in thousands):

	As of June 30,
	2017		2016
Fixed assets	$	519	$	610
Share-based compensation		664		545
Reserves		9		13
Other accruals		33		119
Asset retirement obligation		196		203
Net operating loss carryforwards		21,302		19,110
Total deferred tax assets		22,723		20,600
Valuation allowance		(22,723)		(20,600)
Total	$	-	$	-

As management of the Company cannot determine that it is more likely than not that the Company will realize the benefit of the net deferred tax asset, a valuation allowance equal to 100% of the net deferred tax asset has been recorded at both June 30, 2017 and 2016.

The Company has federal net operating loss carryforwards of approximately $61 million on June 30, 2017 that can be used to offset future regular taxable income. These net operating loss carryforwards expire at various times through the years 2027 to 2038.

The Company’s statutory rate reconciliation is as follows (in thousands):

	For the year ended June 30,
	2017		2016		2015
Expected income tax benefit base on statutory rate of 35%	$	(2,157)	$	(1,649)	$	(1,288)
Meals and entertainment		17		7		10
Non-deductible penalties		16		21		19
Warrant derivative liability		(9)		(54)		(131)
Share-based compensation		10		-		-
Change in valuation allowance		2,123		1,675		1,390
Income tax expense (benefit)	$	-	$	-	$	-

The Company has reviewed the tax positions taken and concluded that it does not have to book a liability for uncertain tax positions.

Currently, tax years 2015-2017 remain open for examination by United States taxing authorities. Net operating losses prior to 2015 could be adjusted during an examination of open years.