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Note 10 - Income Taxes | 9 Months Ended
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Mar. 31, 2026
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 10. Income Taxes A summary of our total income tax expense and effective income tax rate for the three and nine months ended March 31, 2026 and 2025 is as follows:
|  | Three Months Ended |  |  | Nine Months Ended |
|  | March 31, |  |  | March 31, |
|  | 2026 |  |  | 2025 |  |  | 2026 |  |  | 2025 |
Loss before income taxes |  | $ | (4,014,897 | ) |  | $ | (3,482,429 | ) |  | $ | (16,201,482 | ) |  | $ | (7,657,010 | )
Income tax provision |  | $ | 91,390 |  |  | $ | 100,031 |  |  | $ | 203,216 |  |  | $ | 160,192 |
Effective income tax rate |  |  | -2 | % |  |  | -3 | % |  |  | -1 | % |  |  | -2 | %
The difference between our effective tax rates in the periods presented above and the federal statutory rate is due to the mix of taxable income and losses generated in our various tax jurisdictions, which include the United States (the “U.S.”), the People’s Republic of China, and the Republic of Latvia. For the three and nine months ended March 31, 2026 and 2025, income tax expense was primarily related to income taxes from our operations in China and Chinese withholding taxes on payments from our wholly-owned subsidiary, LightPath Optical Instrumentation (Zhenjiang) Co., Ltd. (“LPOIZ”), to LightPath for administrative services rendered. We record net deferred tax assets to the extent we believe it is more likely than not that some portion or all of these assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of March 31, 2026 and June 30, 2025, our net deferred tax assets are related to the U.S. jurisdiction and we have provided a valuation allowance to reduce the deferred tax assets to the net amount we estimate is more-likely-than-not to be realized. Our net deferred tax assets as of March 31, 2026 and June 30, 2025 consist primarily of federal and state tax credits with indefinite carryover periods. The net deferred tax liabilities as of March 31, 2026 and June 30, 2025 are related to LPOIZ, primarily resulting from timing differences related to accelerated depreciation on fixed assets. U.S. Federal and State Income Taxes Our U.S. federal and state statutory income tax rate is estimated to be 25.5%. Based on our current assessment of the valuation allowance position on our net deferred tax assets, no additional tax expense or benefit is expected to be recorded on pre-tax income or losses generated in the U.S. On July 4, 2025, the One Big Beautiful Bill Act was enacted (“OBBBA”), introducing significant and wide-ranging changes to the U.S. federal tax system. Significant components include restoration of 100% accelerated tax depreciation on qualifying property including expansion to cover qualified production property. Another major aspect includes the return to immediate expensing of domestic research and experimental expenditures (“R&E”) which in some cases may include retroactive application back to 2021 for businesses with gross receipts of less than $31.0 million or accelerated tax deductions of R&E that was previously capitalized for larger businesses. The legislation also reinstates EBITDA-based interest deductions for tax purposes and makes several business tax incentives permanent. Less favorable business provisions include limitations on tax deductions for charitable contributions. The Company continues to assess the potential impact of this legislation on its future financial position, results of operations, and cash flows. In accordance with GAAP, the effects will be recognized in the period of enactment. While we do not currently anticipate that the provisions of OBBBA will have a material impact, we are currently evaluating any such impacts on a go-forward basis. Income Tax Law of the People’s Republic of China Our Chinese subsidiary, LPOIZ, is governed by the Income Tax Law of the People’s Republic of China. As of March 31, 2026, LPOIZ was subject to a statutory income tax rate of 15%. The net deferred tax liabilities included in these unaudited Condensed Consolidated Balance Sheets as of March 31, 2026 and June 30, 2025 are related to LPOIZ, primarily related to timing differences related to accelerated depreciation on fixed assets. The Company routinely declares intercompany dividends to remit a portion of the earnings of its foreign subsidiaries to the U.S. parent company. The Company also intends to reinvest a portion of the earnings generated by its foreign subsidiaries. The Company accrues withholding taxes on the portion of LPOIZ’s earnings that it intends to repatriate. Accrued and unpaid withholding taxes were approximately $32,000 as of both March 31, 2026 and June 30, 2025. Other than these withholding taxes, these intercompany dividends have no impact on the unaudited Condensed Consolidated Financial Statements. Law of Corporate Income Tax of Latvia Our Latvian subsidiary, ISP Optics Latvia, SIA (“ISP Latvia”), is governed by the Law of Corporate Income Tax of Latvia. Effective January 1, 2018, the Republic of Latvia enacted tax reform with the following key provisions: (i) corporations are not subject to income tax, but are instead subject to a distribution tax on distributed profits (or deemed distributions, as defined) and (ii) the rate of tax was changed to 20%; however, distribution amounts are first divided by 0.8 to arrive at the profit before tax amount, resulting in an effective tax rate of 25%. As a transitional measure, distributions of earnings prior to January 1, 2018 were not subject to tax if declared prior to December 31, 2019. ISP Latvia declared an intercompany dividend to be paid to ISP Optics Corporation (“ISP”), its U.S. parent company, for the full amount of earnings accumulated prior to January 1, 2018. Distributions of this dividend have been fully settled and we currently do not intend to distribute any earnings generated after January 1, 2018. If, in the future, we change such intention, we will accrue distribution taxes, if any, as profits are generated.

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