INCOME TAXES

12 Months Ended

Jun. 30, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

7. INCOME TAXES

The provision for income taxes consists of the following amounts (in thousands):

	Years Ended June 30,
	2023		2022 (Restated)
Current:
Federal	$	1,745	$	733
State		345		451
Deferred:
Federal		6		23
State		258		(85	)
Income tax expense	$	2,354	$	1,122

The effective income tax rate from income from continuing operations differs from the United States statutory income tax rates for the reasons set forth in the table below (in thousands, except percentages).

	Years Ended June 30,
	2023						2022  (Restated)
	Amount			Percent Pretax Income			Amount			Percent Pretax Income
Income before income taxes	$	9,428			100	%	$	5,694			100	%
Computed “expected” income tax expense on income before income taxes	$	1,979			21	%	$	1,183			21	%
State tax, net of federal benefit		672			7	%		266			5	%
Tax incentives		(229	)		(2	%)		(205	)		(4	%)
Uncertain tax position		(119	)		(1	%)		(76	)		(1	%)
Stock based compensation		(114	)		(1	%)		—			—
Other		165			1	%		(46	)		(1	%)
Income tax expense	$	2,354			25	%	$	1,122			20	%

Deferred income taxes reflect the net effects of loss and credit carryforwards and temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities for federal and state income taxes are as follows (in thousands):

	June 30,
	2023			2022 (Restated)
Deferred tax assets:
Federal and state NOL carryforward	$	22		$	22
Research and other credits		65			65
Reserves		122			163
Accruals		267			322
Stock based compensation		814			651
Unrealized losses		—			35
Section 174 capitalization		830			—
Lease liability		599			713
Inventory		351			514
Deferred state tax		31			—
Total gross deferred tax assets	$	3,101		$	2,485
Less: valuation allowance		(91	)		(98	)
Total deferred tax assets		3,010			2,387
Deferred tax liabilities:
Property and equipment, principally due to differing depreciation methods	$	(767	)	$	(820	)
Right of use asset		(546	)		(658	)
Deferred state tax		—			(77	)
Unrealized gains		(1,705	)		(541	)
Other		—			(35	)
Total gross deferred tax liabilities		(3,018	)		(2,131	)
Net deferred tax assets (liabilities)	$	(8	)	$	256

Realization of our deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. As of June 30, 2023, our deferred tax asset valuation allowance primarily consists and the state net operating loss carryforwards for states in which we have filed a final return. For the fiscal year ended June 30, 2023, we recorded a net decrease to our valuation allowance of $7,000 on the basis of management’s reassessment of the amount of our deferred tax assets that are more likely than not to be realized.

As of June 30, 2023, we did not have any net operating losses for federal and state income tax purposes for state jurisdictions in which we currently operate. We have no federal or state research and development and alternative minimum tax credit carry forwards at June 30, 2023.

As of June 30, 2023, we have accrued $345,000 of unrecognized tax benefits related to federal and state income tax matters that would reduce our income tax expense if recognized. If we are eventually able to recognize our uncertain tax positions, our effective tax rate would be reduced. Any adjustment to our uncertain tax positions would result in an adjustment of our tax credit carryforwards rather than resulting in a cash outlay.

Information with respect to our accrual for unrecognized tax benefits is as follows (in thousands):

	June 30,
	2023			2022
Unrecognized tax benefits:
Beginning balance	$	509		$	550
Additions based on federal tax positions related to the current year		16			33
Additions based on state tax positions related to the current year		19			26
Additions (reductions) for tax positions of prior years		(95	)		9
Reductions due to lapses in statutes of limitation		(104	)		(109	)
Ending balance	$	345		$	509

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examinations, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, we do not anticipate any significant changes to unrecognized tax benefits over the next twelve months.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense when applicable. As of June 30, 2023, $45,000 of interest applicable to our unrecognized tax benefits have been accrued.

We are subject to U.S. federal income tax, as well as income tax of California, Colorado, and Massachusetts. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2020, and later.  However, because of our prior net operating losses and research credit carryovers, our tax years from June 30, 2008, are open to audit.