v3.26.3
Note 10 - Income Taxes
 12 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 10.

INCOME TAXES

 

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. 

 

The provision for income taxes for the year ended June 30, 2026 and 2025 consists of the following:

 

  

2026

  

2025

 

Current:

        

Federal

 $1,398,426  $641,718 

State

  602,608   34,132 

Total Current

  2,001,034   675,850 
         

Deferred:

        

Federal

  207,938   - 

State

  (258,973)  - 

Total Deferred

  (51,035)  - 
         

Total Provision

 $1,949,999  $675,850 

 

The table below provides the updated requirements of ASU 2023-09 for the year ended June 30, 2026.

 

  

2026

 
  

Amount

  

Percent

 

Federal income tax expense at the statutory rate

 $1,999,092   21.00%

State and local income taxes, net of Federal income tax effect

  281,123   3.00%

Foreign tax effects

  -   0.00%

Effect of changes in tax laws or rates enacted in the current period

  -   0.00%

Effect of cross-border tax laws

  -   0.00%

Tax credits

  (357,130)  (3.80)%

Change in valuation allowance

  -   0.00%

Nontaxable/nondeductible items

        

Non-deductible officer compensation

  148,143   1.60%

Other, net

  11,154   0.10%

Change in unrecognized tax benefits

  -   0.00%

Other adjustments, net

        

Deferred tax liability adjustment

  106,595   1.10%

Other, net

  (238,978)  (2.50)%
         

Income tax provision (benefit)

 $1,949,999   20.48%

 

Deferred tax assets and liabilities consist of the following components at June 30:

 

  

2026

  

2025

 

Deferred tax assets:

        

NOL carryover

 $889,461  $1,029,290 

Accrued bonus

  144,590   98,278 

Allowance for bad debts

  63,062   63,034 

Accrued expense

  32,292   45,180 

Capital loss carryover

  37,498   38,622 

Tax credits

  271,005   - 

Total deferred tax assets

  1,437,908   1,274,404 
         

Deferred tax liabilities:

        

Amortization

  (1,312,200)  (1,249,542)

Depreciation

  (74,673)  (156,837)

Total deferred tax liabilities

  (1,386,873)  (1,406,379)

Valuation allowance

  -   - 

Net deferred tax asset (liability)

 $51,035  $(131,975)

 

The U.S. federal statutory income tax rate is for 2026 is 21%. The reconciliation of the expected income tax expense (benefit) and the actual income tax expense (benefit) is as follows:

 

  

2025

 
     

Expected income tax expense (benefit)

 $1,465,405 

State income tax expense (benefit)

  348,906 

Federal tax credits

  (1,109,000)

Officer life insurance

  46,249 

Unrealized gain/loss

  (19,923)

Meals and entertainment

  6,329 

Stock expenses

  18,933 

Officer salary (162m limit)

  160,688 

NOL expiry

  509,109 

Other permanent differences

  279,256 

Change in deferred tax asset/liability

  (1,030,102)
     

Total income tax expense/benefit

 $675,850 

 

At June 30, 2026, the Company had net operating loss carryforwards of approximately $4 million that may be offset against past and future taxable income from the year 2026 forward. A significant portion of the net operating loss carryforwards began to expire in 2019. No tax benefit has been reported in the June 30, 2026 consolidated financial statements for NOLs that have expired.

 

The Company recognizes the tax benefit of an uncertain tax position only if it is more likely than not that a tax position will be sustained upon examination by the appropriate taxing authorities, based on technical merits. If the more-likely-than-not threshold is met, the Company measures the tax position to determine the amount to recognize in the financial statements. The Company performed a review of its material tax positions in accordance with these recognition and measurement standards. As of June 30, 2026 and 2025, the Company did not record any material interest expense or penalties related to uncertain tax positions or the settlement of audits for prior periods.

 

The Company includes interest and penalties arising from the underpayment of income taxes in the consolidated statements of operations in the provision for income taxes.

 

The Company files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions. With few exceptions, the Company is no longer subject to U.S. Federal, state and local income tax examinations by tax authorities for the years before June 30, 2023.