| INCOME TAXES | NOTE 8 — INCOME TAXES The Company accounts for income taxes in accordance with FASB ASC Topic 740, Accounting for Income Taxes; which requires the Company to provide a net deferred tax asset or liability equal to the expected future tax benefit or expense of temporary reporting differences between book and tax accounting and any available operating loss or tax credit carry forwards. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined. As of June 30, 2017 and 2016, the Company had net operating loss carryforwards of approximately $11,465,000 and $10,136,400, respectively, giving rise to deferred tax assets of $2,522,287 and $2,230,008, respectively for Danish tax purposes which do not expire. As of June 30, 2017 and 2016, the Company had net operating loss carryforwards of approximately $1,254,003 and $934,920, respectively, giving rise to deferred tax assets of $426,361 and $328,072, respectively for United States tax purposes which expire in 2036. The Company files Danish and U.S. income tax returns, and they are generally no longer subject to tax examinations for years prior to 2008 for their Danish tax returns and 2012 for their U.S. tax returns. The temporary differences, tax credits and carry forwards gave rise to the following deferred tax asset (liabilities) at June 30, 2017 and 2016:
June 30,
2017 2016
Excess of Tax over book depreciation Fixed assets $ 6,753 $ 7,660
Excess of Tax over book depreciation Patents 4,975 870
Net Operating Loss Carryforward 2,948,648 2,558,080
Valuation Allowance (2,960,376 ) (2,566,610 )
Total Deferred Tax Asset (Liabilities) $ - $ - In accordance with prevailing accounting guidance, the Company is required to recognize and disclose any income tax uncertainties. The guidance provides a two-step approach to recognize and disclose any income tax uncertainties. The guidance provides a two-step approach to recognizing and measuring tax benefits and liabilities when realization of the tax position is uncertain. The first step is to determine whether the tax position meets the more-likely-than-not condition for recognition and the second step is to determine the amount to be recognized based on the cumulative probability that exceeds 50%. The amount of and ultimate realization of the benefits from the deferred tax assets for income tax purposes is dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which can be difficult to determine and can only be estimated. Management estimates that it is more likely than not that the Company will not generate adequate net profits to use the deferred tax assets; and consequently, a valuation allowance was recorded for all deferred tax assets. A reconciliation of income tax expense at the federal statutory rate to income tax expense at the Company’s effective rate is as follows for the year ended June 30, 2017 and the year ended June 30, 2016:
June 30,
2017 2016
Computed Tax at Expected Statutory Rate $ (750,620 ) $ (747,329 )
Non-US Income Taxed at Different Rates 47,252 236,700
Non-Deductible expenses / other items 244,725 32,209
Valuation allowance 393,766 15,633
Income Tax Expense $ (64,877 ) $ (462,787 ) The components of income tax expense (benefit) from continuing operations for the year ended June 30, 2017 and the year ended June 30, 2016 consisted of the following:
June 30,
Current Tax Expense 2017 2016
Danish Income Tax (Benefit) $ (64,877 ) $ (462,787 )
Total Current Tax Expense (Benefit) $ (64,877 ) $ (462,787 )
Deferred Income Tax Expense (Benefit)
Excess of Tax over Book Depreciation Fixed Assets 907 2,580
Excess of Tax over Book Depreciation Patents (4,105 ) 4,690
Net Operating Loss Carryforwards (390,568 ) (22,903 )
Change in the Valuation allowance 393,766 15,633
Total Deferred Tax Expense $ - $ - Deferred income tax expense/(benefit) results primarily from the reversal of temporary timing differences between tax and financial statement income. |
