NOTE

No.

740

(“ASC ) deferred income taxes reflect the net effect of (a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax reporting purposes, and (b) net operating loss carryforwards. net provision for refundable Federal income taxes has been made in the accompanying statement of operations because recoverable taxes were paid previously. Significant components of the Company’s net deferred tax assets at and are shown below. A valuation allowance of approximately and has been established to offset the net deferred tax assets as of and respectively, due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets.

’s tax years for and forward are subject to examination by the United States and California tax authorities due to the carry forward of unutilized net operating losses and research and development credits (if any).

no

not

January 1, 2006

June 30,

deferred tax assets do include excess tax benefits from stock-based compensation. 

June 30, 2017

, the Company had unused net operating loss carryovers of approximately and that are available to offset future federal and state taxable income, respectively. These operating losses begin to expire in

e at and due to the following:

382

50%

three

  The Company has yet completed a Section net operating loss analysis. In the event that such analysis determines there is a limitation on the use on net operating loss carryforwards to offset future taxable income, the recorded deferred tax asset relating to such net operating loss carryforwards will be reduced. However, as the Company has recorded a full valuation allowance against its net deferred tax assets, there is impact on the Company’s consolidated financial statements as of and

No.

740,

(“ASC ), which clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements, and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than- to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will be recognized if it has less than a likelihood of being sustained. Additionally, ASC provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

740,

tax benefits as of or