11. INCOME TAXES

12 Months Ended

Jun. 30, 2017

Income Tax Disclosure [Abstract]

11. INCOME TAXES

The components of the income tax (benefit) provision are as follows:

	As of
	June 30,		June 30,
	2017		2016
Current
Federal	$	-	$	-
State		-		-
Total Current		-		-
Deferred
Federal		-		-
State		-		-
Total Deferred		-		-
Income tax provision	$	-	$	-

A reconciliation of the expected income tax benefit (provision) computed using the federal statutory income tax rate of 34% to the Company’s effective income tax rate is as follows: 

	As of
	June 30,			June 30,
	2017			2016
Income tax benefit based on federal statutory rate	$	4,914,000	)	$	(488,000	)
State income tax benefit, net of federal income tax		(475,000	)		(487,000	)
Change in deferred tax valuation allowance		5,389,000			975,000
Other, net		-			-
Income tax provision	$	-		$	-

The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and deferred tax liabilities are presented below: 

	As of
	June 30,			June 30,
	2017			2016
Deferred tax assets:
Debt extinguishment	$	-		$	-
Impairment of fixed assets		-			-
Domestic net operating loss carryforwards		11,671,000			10,475,000
Total gross deferred tax assets		11,671,000			10,475,000
Less valuation allowance on deferred tax assets		(11,671,000	)		(10,475,000	)
Net deferred tax assets		-			-
Deferred tax liabilities:
Deferred costs		-			-
Total deferred tax liabilities		-			-
Net deferred taxes	$	-		$	-

Deferred income taxes result from temporary differences between income tax and financial reporting computed at the effective income tax rate. The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. Management periodically evaluates the recoverability of the deferred tax assets. At such time it is determined that it is more likely than not that deferred tax assets are realizable, the valuation allowance will be reduced.

The Company files U.S. federal and Arizona income tax returns. Our major tax jurisdictions are U.S. federal and the State of Arizona and are subject to tax examinations for the open years from 2009 through 2012. As of the date of this filing, the Company has not filed its tax return for the fiscal year ended 2012. While none are anticipated, fines and/or penalties may be associated with the delinquent filing.

As of June 30, 2017, and 2016, the Company had net operating loss carry-forwards for federal and state income tax purposes of approximately $32 million and $28 million, respectively.  Such carryforwards may be used to reduce taxable income, if any, in future year subject to limitations of Section 382 of the Internal Revenue Code for federal income and Arizona tax purposes.  The Company believes an ownership change may have occurred, as defined by Sections 382 and 383 of the Internal Revenue Code, which could result in the forfeiture of a significant portion of its net operating loss carry-forwards. The Company is not using any tax attributes in the current year, but will analyze whether a change occurred and the related impact on its gross deferred tax assets, if needed. As the Company's analysis is not complete, the impact to its gross deferred tax assets is uncertain.  If not utilized, the federal and state net operating loss carry-forwards will begin expiring in 2017.