INCOME TAXES

12 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

 NOTE 11 - INCOME TAXES

In accordance with ASC 740, “Accounting for Income Taxes” prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a corporate tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as unrecognized benefits. A liability is recognized (or amount of net operating loss carryforward or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740. The Company believes there are no uncertain tax positions in prior year’s tax filings and therefore it has not recorded a liability for unrecognized tax benefits.

In accordance with ASC 740, interest costs related to unrecognized tax benefits are required to be calculated (if applicable) and would be classified as “Interest expense, net. Penalties if incurred would be recognized as a component of “Selling, general and administrative” expenses.

The Company files corporate income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2019.

The Company has recorded a deferred tax asset of $10,041,960 and a deferred tax liability of $394,758 as of June 30, 2023, primarily relating to its net Federal operating loss carryforwards of approximately $9,110,000 available to offset future taxable income through 2031. In addition the Company has state operating loss carryforwards of approximately $11,130,000 and city operating loss carryforwards allowance for doubtful accounts and tax credits of approximately $1,235,000. The net operating losses begin to expire in 2025 for federal tax and state income tax purposes.

Future ownership changes as determined under Section 382 of the Internal Revenue code could further limit the utilization of net operating loss carryforwards. As of June 30, 2023, no such changes in ownership have occurred.

The Inflation Reduction Act (“IRA”) was enacted on August 16, 2022. The IRA includes provisions imposing a 1% excise tax on share repurchases that occur after December 31, 2022 and introduces a 15% corporate alternative minimum tax (“CAMT”) on adjusted financial statement income. The CAMT will be effective for tax years beginning after December 31, 2022. Currently, the Company does not expect the IRA to have a material impact to the Company’s financial statements.  

The ultimate realization of deferred tax assets is dependent on the generation of future taxable income during the periods in which temporary differences become deductible or when such net operating losses can be utilized. The Company considers projected future taxable income, the regulatory environment of the industry, and tax planning strategies in making this assessment. At present, the Company believes that it is more likely than not that the benefits from certain deferred tax asset carryforwards, will not all be fully realized. In recognition of this inherent risk, a valuation allowance was established for the partial value of the deferred tax asset, which principally related to certain state net operating losses. A valuation allowance will be maintained until sufficient positive evidence exists to support the reversal of the remainder of the valuation.

The valuation allowance for deferred tax assets decreased during the year ended June 30, 2023, by approximately $78,000. The valuation allowance decreased by approximately $448,000 during the year ended June 30, 2022.

Components of the provision (benefit) for income taxes are as follows:

	Years Ended June 30,
Current:	2023		2022
Federal	$	—	$	—
State		652,522		2,440,594
Subtotal		652,522		2,440,594
Deferred:
Federal deferred taxes		2,770,980		2,935,921
State deferred taxes		208,569		157,972
Subtotal		2,979,549		3,093,893
Provision (Benefit) for Income Taxes - Net	$	3,632,071	$	5,534,487

A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate as reported is as follows: 

Reconciliation Of Federal Statutory Income Tax Rate To Company’s Effective Tax Rate
	Years Ended June 30,
	2023			2022
Taxes at federal statutory rate		21.0	%		21.0	%
State and local income taxes (benefit), net of federal benefit		5.1	%		4.2	%
Noncontrolling interest		(4.6	)%		(5.5	)%
Expiration of tax credits		2.8	%		2.0	%
Return to provision adjustments		(2.3	)%		0.7	%
New York state audit settlement		—			4.5	%
Change in the valuation allowance		(0.5	)%		(2.0	)%
Other		1.5	%		(0.6	)%
Effective income tax rate		23.0	%		24.3	%

As of June 30, 2023, the Company has net operating loss (“NOL”) carryforwards of approximately $9,110,000 that will be available to offset future taxable income. The utilization of certain of the NOLs is limited by separate return limitation year rules pursuant to Section 1502 of the Internal Revenue Code.

The Company has, for federal income tax purposes, research and development tax credits and investments tax credits carryforwards aggregating $2,981,000. However, the realization of these credits may be limited as a result of expiring prior to their utilization. These credits can only be applied after all net operating losses have been used, which expire through 2031.

The Company was also under audit with New York State for income tax and was assessed additional taxes of $1,014,071 plus interest and penalties. These amounts were paid during fiscal year ending June 30, 2022.   

Significant components of the Company’s deferred tax assets and liabilities at June 30, 2023 and 2022 are as follows:

Components Of Company’s Deferred Tax Assets and Liabilities
	June 30,
	2023			2022
Deferred tax assets:
Allowance for doubtful accounts	$	3,360,809		$	4,239,903
Non-deductible accruals		707,400			707,400
Net operating carryforwards		2,768,844			4,820,010
Tax credits		2,981,214			3,346,509
Capitalized research and development		369,675			—
Right of use assets and lease liabilities		112,938			—
Inventories		105,310			98,945
Property and equipment and depreciation		—			71,576
Deferred Tax Assets - gross		10,406,190			13,284,343
Valuation allowance		(364,230	)		(441,865	)
Total deferred tax assets		10,041,960			12,842,478
Property and equipment and depreciation		(151,007	)		—
Intangibles		(243,751	)		(215,726	)
Total deferred tax liabilities		(394,758	)		(215,726	)
Net deferred tax asset	$	9,647,203		$	12,626,752