Note 10 - Income Taxes

12 Months Ended

Jun. 30, 2016

10.

Income Taxes

Loss before income tax benefits was comprised of $17,789 from US and $799 from foreign jurisdictions in 2016 and $14,041 from US and $811 from foreign jurisdictions in 2015.

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:

	2016			2015
Statutory federal income tax benefit	$	(6,300	)	$	(5,046	)

Unbenefited net operating losses and credits		3,391			5,091
Disallowed financing costs		2,607			--
State and local taxes		69			(33	)
Other		233			(12	)

Total income tax expense	$	--		$	--

A deferred income tax expense of $0 was recorded for the year ended June 30, 2016. No tax benefit has been recorded through June 30, 2016 because of the net operating losses incurred and a full valuation allowance has been provided. 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, 2016, the Company had net operating loss carryforwards for federal and state income tax purposes of $110,819 and $45,284 respectively that are available to offset future income. The federal and state loss carryforwards expire in various years between 2017 and 2036.

At June 30, 2016, the Company has research and experimentation credit carryforwards of $1,418 for federal tax purposes that expire in various years between 2019 and 2036, and $1,437 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, 2016			June 30, 2015
Deferred tax assets:
Net operating loss carryforwards	$	41,023		$	38,317
Income tax credit carryforwards		2,367			2,143
Stock compensation		874			916
Other		1,345			1,479
Valuation allowance		(45,892	)		(42,408	)
Total deferred taxes		(283	)		447

Deferred tax liabilities
Depreciation and amortization		(7,358	)		(8,088	)
Net deferred taxes and liabilities	$	(7,641	)	$	(7,641	)

The valuation allowance increased by $3,484 in 2016. As of June 30, 2016, the Company has a benefit of $219 related to stock option deductions, which will be credited to paid-in capital when realized.

In August 2016, the conversion of the debentures with Boyalife Investment Inc. (see subsequent events footnote 12) 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.