Rezolute, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes

12 Months Ended

Jun. 30, 2018

Note 9 Income Taxes

Taxing jurisdictions related to income taxes are the Unites States Federal Government, the State of Colorado and the State of California. The provision for income taxes is as follows:

	Year Ended June 30,
	2018			2017
Current tax benefit
Federal	$	-		$	-
State		-			-
	$	-		$	-

Deferred tax benefit
Federal		1,410,582			5,542,631
State		(1,326,566	)		618,192
Change in valuation allowance		(84,016	)		(6,160,823	)

Total tax expense	$	-		$	-

Deferred taxes are a result of differences between income tax accounting and GAAP with respect to income and expenses. The following is a summary of the components of deferred taxes recognized in the financial statements as of June 30, 2018 and 2017:

	As of June 30,
	2018			2017
Deferred tax assets
Net operating loss carryforward	$	15,563,220		$	15,358,843
Start-up and organizational expenses		333,868			540,221
Stock-based compensation		4,161,916			5,111,766
Fixed assets		514,878			-
Other		467,372			529,096
Total deferred tax assets		21,041,254			21,539,926

Deferred tax liabilities
Fixed assets		-			349,346
Federal benefit for state deferred taxes		798,221			863,531
Total deferred tax liabilities		798,221			1,212,877

Valuation allowance		(20,243,033	)		(20,327,049	)
Net deferred taxes		-			-

The valuation allowance was established because the Company had not reported earnings in order to support the recognition of the deferred tax asset. The Company has net operating loss carryforwards of approximately $60,700,000 for federal and state income tax purposes. Federal and state net operating loss carryforwards, to the extent not used, will expire starting in 2031. Under provisions of the Internal Revenue Code, substantial changes in the Company’s ownership may result in limitations on the amount of net operating loss carryforwards that can be utilized in future years. As of June 30, 2018, approximately $6,281,000 of the net operating loss carryforwards are subject to IRS limitations. The Company is no longer subject to income tax examinations for federal income taxes before 2013 and for Colorado before 2012.

The Tax Cuts and Jobs Act of 2017 (the “Act”) was enacted on December 22, 2017 and significantly revises tax law. The Act reduces the U.S. federal corporate tax rate from 35% to 21%, effective requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously deferred and includes a variety of other changes. Consequently, we recorded a provisional decrease of approximately $8.9 million. This reduction way fully offset by a corresponding change in the valuation allowance recorded against the deferred tax assets.

The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate of 27.5% to pretax income for the following periods, due to the following:

	Year Ended June 30,
	2018			2017

Computed “expected” tax expenses (benefit)	$	(8,078,305	)	$	(6,894,226	)
Change in income taxed From:
State Taxes net of Federal Benefit		(984,553	)		(617,139	)
Permanent Difference		12,406			18,150
Return To provision		-			(205,794	)
Stock option expiration		644,780			1,538,186
Tax Cuts and Jobs Act		8,489,688			-
Change in valuation allowance		(84,016	)		6,160,823
	$	-		$	-