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

NOTE 10 - INCOME TAXES

 

Income tax expense is computed using an asset and liability method using expected annual effective tax rates. Under this method, deferred income tax assets and liabilities result from temporary differences in the financial reporting basis and the income tax basis of assets and liabilities. The measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefit that, based on available evidence, is not expected to be realized. When it appears more than likely than not that deferred taxes will not be realized, a valuation allowance is recorded to reduce the deferred tax asset to its realizable value. For net deferred tax assets we consider estimates of future taxable income in determining whether or net deferred tax assets are more likely than not to be realized.

 

The Company has recorded a deferred tax asset of $6,349,194 and a deferred tax liability of $321,159 as of June 30, 2025, primarily relating to its allowance for credit losses of $4,366,000, non deductible accruals of $759,000 and capitalized research and development costs of approximately $960,000. During fiscal 2025, the Company utilized all tax credits pertaining to research and development costs. In addition the Company has state operating loss carryforwards of approximately $3,694,000. The Company has also fully recorded a valuation allowance against all of the state operating losses since the Company doesn’t anticipate being able to utilize them.

 

The Company files corporate income tax returns in the United States (federal) and in various state and local jurisdictions. In most instances, the Company is no longer subject to federal, state and local income tax examinations by tax authorities for years prior to 2021.

 

Future ownership changes as determined under Section 382 of the Internal Revenue code could further limit the utilization of net operating loss carryforwards. As of June 30, 2025, no such changes in ownership have occurred.

 

On July 4, 2025, the One Big Beautiful Act (“OBBBA) was signed into law, which enacts significant changes to the U.S. tax and related laws. Some of the provisions of the new tax law that affect corporations include but are not limited to expensing of domestic specified research or experimental expenditures, increasing the limit of the deduction to thirty percent of EBITDA, and one hundred percent bonus depreciation on eligible property acquired after January 19, 2025. The Company is currently evaluating the impact that the new tax law will have on its financial condition and results of operations.

 

The valuation allowance for deferred tax assets decreased during the year ended June 30, 2025, by approximately $67,000. The valuation allowance decreased by approximately $171,000 during the year ended June 30, 2024.

 

Components of the provision for income taxes are as follows:

 

          
Components Of The Provision For Income Taxes      
   Years Ended June 30,
Current:  2025  2024
Federal  $1,374,724   $429,873 
State   908,421    1,943,588 
Subtotal   2,283,145    2,373,461 
Deferred:          
Federal deferred taxes   838,154    2,585,515 
State deferred taxes   (14,494)   209,992 
Subtotal   823,660    2,795,507 
Provision (Benefit) for Income Taxes - Net  $3,106,805   $5,168,968 

 

A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate as reported is as follows:

 

                    
   For the Year Ended
June 30, 2025		  For the Year Ended
June 30, 2024
   Amount  Percent  Amount  Percent
Taxes at federal statutory rate  $2,893,850    21%  $4,169,123    21%
State and local income taxes  $978,397    7.1%  $1,409,561    7.1%
Noncontrolling interests  ($657,307)   (4.6%)  ($1,049,294)   (5.3%)
Valuation Allowance  ($218,390)   (1.6%)  ($48,179)   (0.2%)
Permanent items – Meals and Entertainment  $131,956    1.0%  $126,719    1.5%
Other  ($21,701)   (0.8%)  $561,038    2.7%
Provision for income taxes   ($3,106,805)   22.8%  $5,168,968    26.8%

  

The Company has, for federal income tax purposes, research and development tax credits and investments tax credits carryforwards aggregating $1,323,000 as of June 30, 2024. The Company will utilize the full amount for the tax return for the year ended June 30, 2025. These credits can only be applied after all net operating losses have been used.

 

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

 

               
    June 30,
    2025   2024
Deferred tax assets:                
Allowance for credit losses   $ 4,366,361     $ 3,969,819  
Non-deductible accruals     758,700       758,700  
Net operating carryforwards     259,319       396,092  
Tax credits     —       1,323,018  
Capitalized research and development     960,343       747,407  
Right of use assets and lease liabilities     146,934       114,116  
Inventories     116,856       106,879  
Deferred Tax Assets - gross     6,608,513       7,416,031  
Valuation allowance     (259,319 )     (192,776 )
Total deferred tax assets     6,349,194       7,223,255  
Property and equipment and depreciation     165,532 )     (267,124 )
Intangibles     (155,627 )     (104,436 )
Total deferred tax liabilities     (321,159 )     (371,560 )
Net deferred tax asset   $ 6,028,035     $ 6,851,695