For fiscal 2017, the Company incurred $500,000 of federal AMT expense based on federal alternative minimum taxable income attributable to the $60,000,000 initial payment from AMAG. For fiscal 2016 the Company had no income tax expense because of operating losses or a tax benefit from the sale of New Jersey state net operating loss carryforwards on account that it reached the state limits on the sale of New Jersey state net operating loss carryforwards and tax credits. In fiscal 2015 the Company recorded an income tax benefit of $531,508 for amounts recognized for the sale of New Jersey state net operating loss carryforwards and tax credits.

Deferred tax assets and liabilities are determined based on the estimated future tax effect of differences between the financial statement and tax reporting basis of assets and liabilities, as well as for AMT credit carryforwards, net operating loss carryforwards and research and development credit carryforwards, given the provisions of existing tax laws.

As of June 30, 2017, the Company had state net operating loss carryforwards of approximately $111,000,000, which will expire, if not utilized, between 2017 and 2037, federal net operating loss carryforwards of approximately $278,000,000, federal research and development credits of approximately $11,900,000, which expire, if not utilized, between 2020 and 2037, and AMT credits of $500,000, which can be carried forward indefinitely if not utilized.

The Tax Reform Act of 1986 (the “Act”) provides for limitation on the use of these net operating loss and research and development tax credit carryforwards following certain ownership changes (as defined by the Act) that could limit the Company’s ability to utilize these carryforwards. Since its inception, the Company has completed several financings and sales of common stock which has resulted in multiple ownership changes defined by Section 382 of the Act. Accordingly, the Company’s ability to utilize the aforementioned carryforwards are subject to limitation under Section 382. The Company does have adequate levels of available net operating loss carryforwards that are not subject to limitation under Section 382 to offset taxable income during the tax year ended June 30, 2017. If the Company undergoes a future ownership change or as it completes its Section 382 limitation assessment, any unutilized carryforwards that were not previously subject to a Section 382 limitation may become subject to limitation which may result in a significant limitation and loss of net operating loss carryforwards. Additionally, U.S. tax laws limit the time during which these carryforwards may be applied against future taxes; therefore, the Company may not be able to take full advantage of these carryforwards for federal income tax purposes. Accordingly, a portion of the carryforwards may expire unutilized. 

The Company’s net deferred tax assets are as follows:

In assessing the realizability of deferred tax assets, the Company 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 and the application of loss limitation provisions related to ownership changes. The Company assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. The Company also considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax­planning strategies in making this assessment. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three­year period from July 1, 2014 through June 30, 2017. On the basis of these considerations, the Company continued to recognize a full valuation allowance against its net deferred tax assets as of June 30, 2017 and 2016.

The deferred tax asset related to deferred revenue is attributable to the AMAG arrangement at June 30, 2017 at a combined incremental tax rate of approximately 40%.

The Company recognizes interest expense and penalties on uncertain income tax positions as a component of interest expense. No interest expense or penalties were recorded for uncertain income tax matters in fiscal 2017, 2016 or 2015. As of June 30, 2017 and 2016, the Company had no liabilities for uncertain income tax matters.