Note 7 - Income Taxes

12 Months Ended

Jun. 30, 2024

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,
	2024		2023
Current - Federal tax expense	$	-	$	-
Current - State tax expense		31		61
Deferred - Federal tax expense		124		55
Deferred - State tax expense		1		18
Income tax expense, net	$	156	$	134

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

	For the fiscal year
	ended June 30,
	2024			2023
Statutory federal income tax rate		21.0	%		21.0	%
State income tax rate		25.6	%		74.6	%
Stock compensation		21.1	%		166.0	%
Change in valuation allowance		(61.6	)%		(188.0	)%
Write-off of valuation allowance		62.1	%		18.0	%
Federal and state true-up		(10.4	)%		11.4	%
Loss on sale of iBio Stock		-			18.4	%
Non-deductible expenses		0.6	%		12.6	%
Effective income tax rate		58.4	%		134.0	%

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,
	2024			2023
Deferred Tax Assets
Net operating loss	$	5,032		$	5,105
Capital loss carryover		678			678
Depreciation		(149	)		(139	)
Inventory		161			180
Other		150			337
Valuation allowance		(1,271	)		(1,435	)
Total deferred tax asset, net	$	4,601		$	4,726

The Company has net operating losses (“NOL”) of approximately $21,345 for federal purposes which expire beginning in 2028, which were federal NOLs generated prior to 2018. NOLs generated post 2018 have an indefinite life, subject to 80% of taxable income, there were no NOLs generated post 2018. State NOL’s of approximately $4,005 expire beginning in 2031 through 2039. The Company also has capital loss carryforwards of $2,343 of which $271, $1,152 and $920 will expire in 2025, 2026 and 2028, respectively. 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, 2021, 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.

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, 2024.  Additionally, there were no interest or penalties outstanding as of or for each of the fiscal years ended June 30, 2024 and 2023.

The latest three years of Federal and four years of state tax returns filed for the fiscal years ended through June 30, 2024 are currently open. The tax returns for the year ended June 30, 2024 will be filed by March 15, 2025.