Income Taxes

12 Months Ended

Jun. 30, 2024

Income Taxes [Abstract]

INCOME TAXES

(13) INCOME TAXES

The Company has net operating loss carryforwards for federal income taxes of approximately $45,000,000 at June 30, 2024, the unused portions of which expire in years 2025 through 2037. The Company accounts for income taxes under Accounting Standards Codification 740, Income Taxes “ASC 740”. ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial losses and the tax basis of assets and liabilities for both the expected future tax benefit to be derived from tax losses and tax credit carry forwards. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Internal Revenue Code Section 382 “IRC 382” places a limitation on the amount of taxable income that can be offset by carry forwards after a change in control (generally greater than a 50% change in ownership). The issuance of the Company’s Series M Preferred Stock on August 4, 2014 resulted in a change of control as defined under IRC 382. As of the change of control date, the taxpayer’s net operating loss carryforwards from prior years was $72,478,914 and the pro rata share of pre-change losses in the tax year ended June 30, 2015 was $109,691. This resulted in total pre- change losses of $72,588,605 subject to limitation under IRC Section 382. On the change date the values of the old loss corporation was $3,168,568 and the AFR was 3.05% resulting in an annual limitation amount of $96,641. The pro rata share of post-change net operating loss incurred in the tax year ended June 30, 2015 and the net operating loss incurred in tax years ended June 30, 2016 through 2024 are not subject to limitation. Post change losses not subject to limitation through June 30, 2024 are $10,000,000. Approximately $5,900,000 of losses expire between 2023 and 2037. Approximately $5,600,000 have no expiration, but are subject to certain annual restrictions.

The table below summarizes the differences between the Company’s effective tax rate and the statutory federal rate as follows for the periods ended June 30, 2024 and 2023:

	2024			2023
Statutory federal rate		(21.00	)%		(21.00	)%
State tax rate, net of federal effect		(4.345	)%		(4.345	)%
Change in valuation allowance		25.345	%		25.345	%
Effective Tax Rate		-	%		-	%

Deferred tax assets and liabilities are provided for significant income and expense items recognized in different years for tax and financial reporting purposes. The components of the net deferred tax assets for the years ended June 30, 2024 and 2023 were as follows:

	2024			2023
Deferred tax assets:
Inventory Reserve	$	-		$	25,367
Federal and state net operating loss carry forward		2,871,672			2,843,304
Total deferred tax asset		2,871,672			2,868,671
Less Valuation Allowance		(2,871,672	)		(2,868,681	)
Net deferred Tax Asset	$	-		$	-

The Company has fully reserved the deferred tax asset due to management’s determination that it is highly unlikely that the Company will generate taxable income in the future and realize the tax benefits of the net operating loss carryforwards and due to the limitation of income that can be offset by net operating loss carry forwards in future periods under IRC section 382 because of change in control that occurred on August 4, 2014. The valuation allowance increased by $3,001 for the year ended June 30, 2024 and increased by $129,234 for the year June 30, 2023. The increase in the valuation allowances for fiscal 2024 and 2023 is a result of the net operating losses incurred in that year exceeding the amount of net operating loss carryforward that expired in the same year as well as an increase in the effective tax rate.