June 30, 2018 the Company had estimated U.S. federal net operating losses of approximately
$3,270,000 for income tax purposes which will expire between 2033 and 2038. For financial
reporting purposes, the entire amount of the net deferred tax assets has been offset
by a valuation allowance due to uncertainty regarding the realization of the assets.
The net change in the total valuation allowance for the year ended June 30, 2017 was
an increase of $1,100,294. The Company follows FASC 740-10-25 P which requires a company
to evaluate whether a tax position taken by the company will “more likely than
not” be sustained upon examination by the appropriate tax authority. The Company
has analyzed filing positions in all of the federal and state jurisdictions where it
is required to file income tax returns, as well as all open tax years in these jurisdictions.
The Company believes that its income tax filing positions and deductions would be sustained
on audit and does not anticipate any adjustments that would result in a material change
to its financial position. Therefore, no reserves for uncertain income tax positions
have been recorded.
Company may not be able to utilize the net operating loss carryforwards for its US income taxes in future periods should
it experience a change in ownership as defined in Section 382 of the Internal Revenue Code (“IRC”). Under
section 382, should the Company experience a more than 50% change in its ownership over a 3 year period, the Company would
be limited based on a formula as defined in the IRC to the amount per year it could utilize in that year of the net operating
of June 30, 2018 the Company had not performed an analysis to determine if the Company was subject to the provisions of
Section 382. The Company is subject to U.S. federal income tax including state and local jurisdictions. Currently, no
federal or state income tax returns are under examination by the respective taxing jurisdictions.
Company’s accounting policy is to recognize interest and penalties related to uncertain tax positions in income
tax expense. The Company has not accrued interest for any periods.
The Company has not filed its federal and state income tax returns for the fiscal years ended June 30,
2017 and 2016 respectively, however it believes due to the reported losses there is no material liability outstanding.