14. INCOME TAXES

3 Months Ended

Sep. 30, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

The provision (benefit) for income taxes consists of the following:

	Three months ended September 30,
	2013			2012
Current	$	(19,729	)	$	-
Deferred		-			-
Provision (benefit) for income taxes	$	(19,729	)	$	-

The Company accounts for income taxes using an asset and liability approach which generally requires the recognition of deferred income tax assets and liabilities based on the expected future income tax consequences of events that have previously been recognized in the Company’s financial statements or tax returns. In addition, a valuation allowance is recognized if it is more likely than not that some or all of the deferred income tax assets will not be realized in the foreseeable future. Deferred income tax assets are reviewed for recoverability based on historical taxable income, the expected reversals of existing temporary differences, tax planning strategies and projections of future taxable income. As a result of this analysis, the Company has provided for a valuation allowance against its net deferred income tax assets as of September 30, 2013 and 2012.

The Company’s combined effective income tax rate differed from the U.S. federal statutory income rate as follows:

	Three months ended September 30,
	2013			2012
Income tax benefit computed at the U.S. federal statutory rate		-34	%		-34	%
Australia research and development credit		-1			0
Change in valuation allowance		34			34
Total		-1	%		0	%

Significant components of the Company’s net deferred income tax assets as of September 30, 2013 and June 30, 2013 were as follows:

	September 30, 2013			June 30, 2013
Federal net operating loss carryforwards	$	20,446,796		$	19,777,894
Federal - other		2,486,636			2,273,021
Wisconsin net operating loss carryforwards		2,583,815			2,482,692
Australia net operating loss carryforwards		1,430,293			1,398,139
Deferred income tax asset valuation allowance		(26,947,539	)		(25,931,746	)
Total deferred income tax assets	$	-		$	-

The Company has U.S. federal net operating loss carryforwards of approximately $60 million as of September 30, 2013, that expire at various dates between June 30, 2016 and 2033.  The Company also has $1,644,864 in other federal deferred tax assets comprised of charitable contributions carryforwards and intangible amortization.  The Company has U.S. federal research and development tax credit carryforwards of approximately $87,000 as of September 30, 2013 that expire at various dates through June 30, 2033.  As of September 30, 2013, the Company has approximately $50 million of Wisconsin net operating loss carryforwards that expire at various dates between June 30, 2014 and 2028.  As of September 30, 2013, the Company also has approximately $4.8 million of Australian net operating loss carryforwards available to reduce future taxable income of its Australian subsidiary with an indefinite carryforward period.

A reconciliation of the beginning and ending balance of unrecognized income tax benefits is as follows:

	September 30, 2013		June 30, 2013
Beginning balance	$	193,097	$	208,593
Effect of foreign currency translation		2,168		(15,496	)
Ending balance	$	195,266	$	193,097

The unrecognized income tax benefits relate to the credit the Company claimed during fiscal 2011 related to a refundable Australian research and development tax credit for qualified expenditures incurred during fiscal year 2010.  If recognized, it would favorably affect the effective income tax rate.  The amount is included in accrued expenses in the accompanying consolidated balance sheets.

The Company’s issuance of additional shares of common stock has constituted an ownership change under Section 382 of the Internal Revenue Code which places an annual dollar limit on the use of net operating loss (“NOL”) carryforwards and other tax attributes that may be utilized in the future.  The calculation of the annual limitation of usage is based on a percentage of the equity value immediately after any ownership change.  The annual amount of tax attributes that may be utilized after the change in ownership is limited.  Previous issuances of additional shares of common stock also resulted in ownership changes and the annual amount of tax attributes from previous years is limited as well.  The extent of any limitations on the usage of net operating losses has not been determined.