Note

. Income Taxes

The components of the provision for income taxes consists of the following:

	For the fiscal year
	ended June 30,
	2019			2018

Current - Federal	$	36		$	4
Current - State and local		287			170
Deferred - Federal and state		621			430
Change in valuation allowance		(590	)		(278	)
Income tax expense, net	$	354		$	326

December 22, 2017,

the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which significantly changed U.S. tax law. The Tax Act lowered the Company’s U.S. statutory federal income tax rate from

35%

21%

effective

January 1, 2018.

By operation of law, the Company applied a blended U.S. statutory tax rate of

27.5%

for the fiscal year ended

June 30, 2018

and the statutory rate of

21%

for the fiscal year ended

June 30, 2019.

In the fiscal year ended

June 30, 2019

and

2018,

the Company recognized a provision for income taxes of

$354

and

$326,

respectively,

$202

was considered a

one

-time provisional estimate under the Tax Act in the fiscal year ended

June 30, 2018,

relating to the impact of re-measuring the Company’s deferred tax balances to reflect the reduction in the U.S. statutory tax rate from

35%

21%

for years after

2017

and allowable alternative minimum tax carry forward credits. The Company re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse. In addition, the Company elected to record certain deferred tax assets and liabilities related to the alternative minimum tax carry forward credits now allowed to be utilized in future taxable years.

A reconciliation of the statutory tax rate to the effective tax rate is as follows:

	For the fiscal year
	ended June 30,
	2019			2018
Statutory federal income tax rate		21.0	%		27.5	%
Deferred tax effects from Tax Act		0.0	%		20.0	%
Statutory state income tax rate		7.0	%		7.0	%
Effective state income tax rate		7.0	%		9.8	%
Change in valuation allowance		(20.7	)%		(32.9	)%
Other temporary differences		2.0	%		-
Non-deductible expenses		1.0	%		1.0	%
Effective income tax rate		17.3	%		32.4	%

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial accounting purposes and the amounts used for income tax reporting. Significant components of the Company’s deferred tax assets are as follows:

	June 30,
	2019			2018
Deferred Tax Assets
Net operating loss	$	7,642		$	8,247
Capital loss carryover		16			21
Valuation adjustment on investment in iBio, Inc.		512			512
Depreciation		(225	)		(223	)
Inventory		104			105
Other		31			42
Valuation allowance		(7,546	)		(8,137	)
Total deferred tax asset, net	$	534		$	567

The Company has net operating losses (“NOL”) of approximately

$33,000

for federal purposes which expire beginning in

2025.

State NOL’s of approximately

$7,000

expire beginning in

2019

through

2034.

The Company also has capital losses of

$77

which expire in

2020.

The Company files a consolidated U.S. federal income tax return; however, the various state tax returns are filed on a stand-alone basis for the Company and its subsidiaries. MDC has fully utilized its state NOL’s resulting in taxable income on a state level basis.

Realization of the NOL carryforwards and other deferred tax temporary differences is contingent on future taxable earnings. The Company’s deferred tax asset was reviewed for expected utilization using a “more likely than

not”

approach by assessing the available positive and negative evidence surrounding its recoverability. Accordingly, a valuation allowance has been recorded against the Company’s deferred tax asset, as it was determined based upon past taxable losses and inconsistent taxable income in the past few years, that it was “more likely than

not”

that the Company’s deferred tax assets would

not

be realized. As of

June 30, 2019

and

2018,

management determined that certain of the Company’s deferred tax assets were “more likely than

not”

to be realizable and the Company recognized deferred tax benefits related to the release of the valuation allowance on those assets of approximately

$455

and

$185,

respectively.

The Company will continue to assess and evaluate strategies that will enable the deferred tax asset, or portion thereof, to be utilized, and will reduce the valuation allowance appropriately at such time when it is determined that the “more likely than

not”

criteria is satisfied.

There were

significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded on the Company’s consolidated financial statements for the year ended

June 30, 2019.

Additionally, there were

interest or penalties outstanding as of or for each of the fiscal years ended

June 30, 2019

and

2018.

The latest

three

years of Federal and

four

years of state tax returns filed for the fiscal years ended through

June 30, 2018

are currently open except for the State of New Jersey tax filings for MDC which have been reviewed for the tax periods of

2014,

2015,

2016

and

2017.

The tax returns for the year ended

June 30, 2019

will be filed by

March 15, 2020.