14. INCOME TAXES

9 Months Ended

Mar. 31, 2015

Income Tax Disclosure [Abstract]

INCOME TAXES

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

	Nine months ended March 31,
	2015		2014
Current	$	-	$	(86,848	)
Deferred		-		-
Provision (benefit) for income taxes	$	-	$	(86,848	)

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 March 31, 2015 and June 30, 2014.

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

	Nine months ended March 31,
	2015		2014
Income tax (benefit) computed at the U.S. federal statutory rate		-34%		-34%
Foreign tax expense/(benefit)		0%		-2%
Change in valuation allowance		34%		34%
Total		0%		-2%

Significant components of the Company’s net deferred income tax assets as of March 31, 2015 and June 30, 2014 were as follows:

	March 31, 2015			June 30, 2014
Federal net operating loss carryforwards	$	25,561,649		$	22,238,624
Federal - other		2,961,351			2,737,404
Wisconsin net operating loss carryforwards		4,923,086			2,747,275
Australia net operating loss carryforwards		1,497,779			1,497,779
Deferred income tax asset valuation allowance		(34,943,865	)		(29,221,082	)
Total deferred income tax assets	$	-		$	-

The Company has U.S. federal net operating loss carryforwards of approximately $75.2 million as of March 31, 2015, that expire at various dates between June 30, 2017 and 2034.  The Company also has $8.7 million in other federal deferred tax assets comprised principally of non-cash compensation, inventory and warranty reserves, and other intangible assets.  The Company has U.S. federal research and development tax credit carryforwards of approximately $247,000 as of March 31, 2015 that expire at various dates through June 30, 2033.  As of March 31, 2015, the Company has approximately $84.5 million of Wisconsin net operating loss carryforwards that expire at various dates between March 31, 2015 and 2028.  As of March 31, 2015, the Company also has approximately $5.0 million of Australian net operating loss carryforwards available to reduce future taxable income of its Australian subsidiaries with an indefinite carryforward period. 

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

	March 31, 2015			June 30, 2014
Beginning balance	$	196,583		$	193,097
Effect of foreign currency translation		(37,123	)		3,486
Ending balance	$	159,460		$	196,583

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.  Since the valuation allowance fully reserves for all available carryovers, the effect of the reduction would be offset by a reduction in the valuation allowance.