Note 7 - Income Taxes

12 Months Ended

Jun. 30, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

Note 7. Income Taxes

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

	For the fiscal year
	ended June 30,
	2022			2021
Current - Federal	$	-		$	-
Current - State and local		(289	)		(619	)
Deferred - Federal and state		(402	)		(1,190	)
Change in valuation allowance		1,932			2,575
Income tax benefit, net	$	1,241		$	766

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

	For the fiscal year
	ended June 30,
	2022			2021
Statutory federal income tax rate		(21.0	)%		(21.0	)%
Statutory state income tax rate		(9.0	)%		(9.5	)%
Other state income tax rate		(2.5	)%		(2.5	)%
Change in valuation allowance		85.6	%		34.8	%
PPP Note forgiveness		-	%		7.4
Other temporary differences		(5.2	)%		1.4	%
Non-deductible expenses		(0.1	)%		0.0	%
Effective income tax rate		47.8	%		10.6	%

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 net deferred tax assets are as follows:

	June 30,
	2022			2021
Deferred Tax Assets
Net operating loss	$	5,166		$	5,691
Capital loss carryover		299			299
Valuation adjustment on investment in iBio, Inc.		186			186
Depreciation		(157	)		(158	)
Inventory		149			128
Other		296			195
Valuation allowance		(1,141	)		(3,073	)
Total deferred tax asset, net	$	4,798		$	3,268

The Company has net operating losses (“NOL”) of approximately $22,210 for federal purposes which expire beginning in 2028. State NOL’s of approximately $4,407 expire beginning in 2031 through 2039. The Company also has capital loss carryforwards of $1,423 of which $1,152 will expire in 2025 and $271 in 2026. The Company files a consolidated U.S. federal income tax return; however, the various state tax returns were filed on a stand-alone basis for the Company and its subsidiaries until the fiscal year ended June 30, 2020, which state income tax return are now filed on a combined basis. MDC has fully utilized its state NOL’s resulting in taxable income on a state level basis for the combined group.

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, 2022 and 2021, 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 $1,932 and $2,575, 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 no 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, 2022. Additionally, there were no interest or penalties outstanding as of or for each of the fiscal years ended June 30, 2022 and 2021.

The latest three years of Federal and four years of state tax returns filed for the fiscal years ended through June 30, 2021 are currently open except for the State of New Jersey tax filings for CII which have been reviewed for the tax periods of 2018 and 2019. The tax returns for the year ended June 30, 2022 will be filed by March 15, 2023.