Income Taxes

12 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

The Company has not recognized any income tax provisions for the fiscal years ended June 30, 2024 and 2023. The U.S. federal corporate statutory rate of 21.0% is the only applicable corporate tax rate used for fiscal years ended June 30, 2024 and 2023. The statutory rate differs from the Company’s computed expected tax recovery rate due to the following adjustments for the fiscal years ended June 30:

	2024			2023
Net loss before taxes	$	(52,501,819	)	$	(21,338,207	)
Statutory Rate		21	%		21	%
Computed expected tax recovery		(11,025,382	)		(4,481,024	)
State income tax (benefit), net of federal benefit		(315,287	)		-
Section 162(m) adjustments		71,043			-
Other permanent tax differences		(121,985	)		(5,107	)
Share-based Compensation – RSUs/PSUs		701,362			-
Uncertain Tax Positions		(219,450	)		(8,495,803	)
Deferred Adjustments and Other		(518,766	)		113,966
Change in valuation allowance		11,428,465			12,867,968
Total income tax provision	$	-		$	-

The significant components of deferred income tax assets and liabilities at June 30, after applying the statutory corporate income tax rate, are as follows for the fiscal years ended June 30:

	2024			2023
Net operating losses	$	25,676,852		$	19,365,174
Stock-based compensation		2,472,597			982,521
Section 174 capitalization		1,938,732			679,037
Other temporary differences		390,384			2,049
Fixed Assets and Intangibles		1,697,171			13,208
Valuation allowance		(32,175,736	)		(21,041,989	)
Net Deferred Tax Asset	$	-		$	-

We believe that it is more likely than not that the benefit from certain NOL carryforwards will not be realized. At June 30, 2024 and 2023, respectively, we have provided a valuation allowance of $32.2 and $21.0 million on the deferred tax assets recorded to date. If our assumptions change and we determine that we will be able to realize these NOL carryforward amounts, the Company will adjust its disclosures appropriately.

As of June 30, 2024, the Company has accumulated federal and state net operating loss carryforwards of approximately $120.8, and $5.4 million, respectively. If unused, $2.5 million of our federal net operating loss carryforwards will expire in 2032, and $118.3 million will carryforward indefinitely. Approximately $3.5 million of our state net operating loss carryforwards will begin to expire in 2041 and $1.9 million will carryforward indefinitely .In addition, under the Tax Cuts and Jobs Act (Tax Act) the amount of federal net operating losses generated in taxable periods beginning after December 31, 2017, that we are permitted to deduct in any taxable year is limited to 80% of our taxable income in such year, where taxable income is determined without regard to the net operating loss deduction itself. The Tax Act generally eliminates the ability to carry back any net operating loss to prior taxable years, while allowing post-2017 unused net operating losses to be carried forward indefinitely. The Company also has $0.3 million of federal Research and Development Credit carryforwards that will expire in 2041.

Utilization of net operating losses, credit carryforwards, and certain deductions may be subject to a substantial annual limitation due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The tax benefits related to future utilization of federal and state net operating losses, tax credit carryforwards, and other deferred tax assets may be limited or lost if cumulative changes in ownership exceeds 50% within any three-year period. Additional limitations on the use of these tax attributes could occur in the event of possible disputes arising in examinations from various taxing authorities. Any net operating loss or credit carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets.

Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective for fiscal years beginning after January 1, 2022. The mandatory capitalization requirement increases our deferred tax assets and is fully offset with the valuation allowance.

The Company has recorded uncertain tax positions (“UTP”) that result in unrecognized tax benefits recorded on the books of the Company. The unrecognized tax benefits for the Company are as follows as of June 30:

	2024			2023
Unrecognized tax benefits, beginning of period	$	219,450		$	8,715,253
Decrease during the period		(219,450	)		(8,715,253	)
Increase during the period					219,450
Unrecognized tax benefits, end of period	$	-		$	219,450

In the fiscal year ended June 30, 2022, the Company recorded an uncertain tax position related to shares issued to service providers during open tax years. In fiscal year ended June 30, 2023 the Company filed all necessary tax returns and paid approximately $75,000 in penalties and interest remediating past-due payroll tax requirements, for which the Company had accrued at June 30, 2022 and therefore reversed the associated uncertain tax position during the fiscal year ended June 30, 2023.

The Company accrued for an uncertain tax position during the fiscal year ended June 30, 2023 related to Section 162(m) of the Internal Revenue Code, which limits the deductibility of compensation paid to certain executive officers in excess of $1.0 million in any fiscal year. The Company reversed the unrecognized tax position during the fiscal year ended June 30, 2024 and has accounted for the limitation as a reduction of its net operating loss carryforward.

The Company does not have an accrual for interest or penalties related to uncertain tax positions as of June 30, 2024.

The Company files U.S. and state income tax returns with varying statutes of limitations. The tax returns for fiscal years ended September 30, 2016, to June 30, 2023, remain open to examination due to the carryover of unused NOL carryforwards and tax credits. The Company is not under examination by any tax authority as of June 30, 2024.