v3.25.2
INCOME TAXES
 12 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 12 - INCOME TAXES

 

The provision for income tax (expense) benefit consists of the following:

 

For the years ended June 30,  2025   2024 
Federal          
Current tax expense  $-   $- 
Deferred tax expense   -    - 
Federal income tax benefit   -    - 
State          
Current tax expense   (1,000)   (1,000)
Deferred tax expense   -    - 
State and local income tax benefit   (1,000)   (1,000)
Income tax expense  $(1,000)  $(1,000)

 

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

 

For the years ended June 30,  2025   2024 
         
Statutory federal tax rate   21.0%   21.0%
State income taxes, net of federal tax benefit   8.8%   8.8%
Provision to return adjustment   4.3%   -6.6%
Valuation allowance   -31.1%   -22.5%
Other   -3.0%   -0.7%
 Effective income tax rate reconciliation percentage    0.0%   0.0%

 

The components of the Company’s deferred tax assets and (liabilities) as of June 30, 2025 and 2024 are as follows:

 

   2025   2024 
Deferred tax assets          
Net operating loss carryforward  $14,822,000   $14,359,000 
Interest expense   6,385,000    5,157,000 
Accruals and reserves   622,000    596,000 
Depreciation   13,877,000    14,260,000 
Related party interest   2,243,000    - 
State tax credits   165,000    524,000 
Capital loss carryforward   1,054,000    1,333,000 
Other   1,000    111,000 
Deferred tax assets before valuation allowance   39,169,000    36,340,000 
Less Valuation allowance   (39,169,000)   (36,340,000)
Deferred tax assets after valuation allowance   -    - 
           
Deferred tax liabilities          
State taxes   -    - 
Deferred Tax Liabilities   -    - 
Net deferred tax assets  $-   $- 

 

As of June 30, 2025, the Company had net operating loss (“NOL”) carryforwards of approximately $41,378,000 and $69,377,000 for federal and state purposes, respectively. Of the $41,378,000 federal NOL carryforwards, $14,707,000 expire in varying amounts through 2037 and $26,671,000 of post-2017 NOLs can be carried forward indefinitely. Note that the post-2017 NOLs may only offset 80% of future taxable income. The Company had capital loss carryforwards of $5,539,000 for federal and state purposes. The capital losses begin to expire in 2025 for both federal and state purposes. There are immaterial California state tax credits of $165,000 which expire in various years.

 

As of June 30, 2024, the Company had net operating loss (“NOL”) carryforwards of approximately $43,396,000 and $59,340,000 for federal and state purposes, respectively. Of the $43,396,000 federal NOL carryforwards, $14,707,000 expire in varying amounts through 2037 and $26,833,000 of post-2017 NOLs can be carried forward indefinitely. Post-2017 NOLs may only offset 80% of future taxable income. The Company had capital loss carryforwards of $4,468,000 for federal and state purposes. The capital losses begin to expire in 2024 for both federal and state purposes. There are immaterial California state tax credits of $524,000 which expire in various years.

 

Assets and liabilities are established for uncertain tax positions taken or positions expected to be taken in income tax returns where such positions are judged to not meet the “more-likely-than-not” threshold based on the technical merits of the positions. As of June 30, 2025, it has been determined that the company had $1,665,000 of unrecognized tax benefits. No new uncertain tax positions were identified this year.

 

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates and is subject to examination by federal, state and local jurisdictions, where applicable.

 

As of June 30, 2025, tax years beginning in fiscal year 2021 and 2020 remain open to examination by federal and state tax jurisdictions, respectively, and are subject to the statute of limitations.

 

 

Uncertain Tax Positions

 

The Company regularly evaluates the likelihood of realizing the benefit from income tax positions that it has taken in various federal, state and foreign filings by considering all relevant facts, circumstances and information available. If the Company determines it is more likely than not that the position will be sustained, a benefit will be recognized at the largest amount that it believes is cumulatively greater than 50% likely to be realized. The following table summarizes changes in the amount of the Company’s unrecognized tax benefits for uncertain tax positions:

 

      
Unrecognized Tax Benefits at June 30, 2024  $1,665,000 
Increase in tax positions taken   - 
Decrease in tax positions taken   - 
Unrecognized Tax Benefits at June 30, 2025  $1,665,000 

 

As of June 30, 2025 and June 30, 2024, the Company had unrecognized tax benefits, which would affect the effective tax rate if recognized. The unrecognized tax benefits are not expected to reverse within the next 12 months. Interest and penalties related to income tax matters are classified as a component of income tax expense. As of June 30, 2025 and June 30, 2024, no interest and penalties were recorded.