Entity information:
12
.     
Income Taxes
 
Loss before income tax benefits was comprised of
$29,005,000
from US and
$763,000
from foreign jurisdictions in
2017
and
$17,789,000
from US and
$799,000
from foreign jurisdictions in
2016.
 
The reconciliation of federal income tax attributable to operations computed at the federal statutory tax rate of
34%
to income tax benefit is as follows for the years ended
June 30:
 
   
2017
    
2016
  
Statutory federal income tax benefit
   $
(10,121,000
 )   $
(6,300,000
 )
                 
Unbenefited net operating losses and credits
    
2,281,000
      
3,391,000
  
Disallowed financing costs
    
6,959,000
      
2,607,000
  
State and local taxes
    
88,000
      
69,000
  
Other
    
120,000
      
233,000
  
                 
Total income tax benefit
   $
(673,000
 )    $
--
  
 
The deferred income tax benefit of
$673,000
is due to changes in the state tax rate over the last several years. Approximately
$559,000
of the benefit relates to state rate changes prior to fiscal
2017,
which was all recognized in the current year, of which
$157,000
relates to fiscal
2016
and
$402,000
relates to years prior to fiscal
2016.
The Company believes these amounts are quantitatively and qualitatively immaterial to the balance sheets as of
June 30, 2015
and
June 30, 2016,
as well as the statements of operations and comprehensive loss for the years then ended, and to fiscal
2017.
A valuation allowance is provided when it is more likely than
not
that some portion of the deferred tax assets will
not
be realized.
 
At
June 30, 2017,
the Company had net operating loss carryforwards for federal and state income tax purposes of
$118,956,000
and
$42,922,000
respectively that are available to offset future income. The federal and state loss carryforwards expire in various years between
2018
and
2037.
 
At
June 30, 2017,
the Company has research and experimentation credit carryforwards of
$1,458,000
for federal tax purposes that expire in various years between
2019
and
2037,
and
$1,456,000
for state income tax purposes that do
not
have an expiration date.
 
Significant components of the Company’s deferred tax assets and liabilities for federal and state income taxes are as follows:
 
   
June 30, 2017
    
June 30, 2016
  
Deferred tax assets:
                
Net operating loss carryforwards
   $
43,687,000
     $
41,023,000
  
Income tax credit carryforwards
    
2,419,000
      
2,367,000
  
Stock compensation
    
1,047,000
      
874,000
  
Other
    
1,124,000
      
1,858,000
  
Total deferred tax assets
    
48,277,000
      
46,122,000
  
                 
Deferred tax liabilities
                
Indefinite lived intangible assets
    
(6,968,000
 )    
(7,641,000
 )
Depreciation and amortization
    
(176,000
 )    
(230,000
 )
Total deferred tax liabilities
    
(7,144,000
 )    
(7,871,000
 )
Valuation allowance
    
(48,101,000
 )    
(45,892,000
 )
Net deferred taxes
  $
(6,968,000
 )   $
(7,641,000
 )
 
The valuation allowance increased by
$2,209,000
in
2017.
As of
June 30, 2017,
the Company has a benefit of
$215,000
related to stock option deductions, which will be credited to paid-in capital when realized.
 
In
August 2016,
the conversion of the Boyalife Debentures effected an “ownership change” as defined under the provisions of the Tax Reform Act of
1986.
As a result, any net operating loss and credit carryovers existing at that date will be subject to an annual limitation regarding their utilization against taxable income in future periods. Additionally, before the conversion of the debentures, it is possible that “ownership changes” occurred, which could create additional imitations on the use of our net operating losses and credit carryovers.