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Note 12 - Income Taxes
 12 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

NOTE 12. INCOME TAXES

 

The Company and its non-Canadian subsidiaries file a consolidated U.S. federal income tax return. USCAN files a separate tax return in Canada. The Company's components of income (loss) before tax by jurisdiction are as follows:

 

  

Year ended June 30,

 

(dollars in thousands)

 

2025

  

2024

 

United States

 $(322) $1,670 

Canada

  60   245 

Total

 $(262) $1,915 

 

The reconciliation of income tax computed at U.S. federal statutory rates to income tax expense is as follows:

 

  

Year ended June 30,

 
      

% of

      

% of

 

(dollars in thousands)

 

2025

  

Pretax

  

2024

  

Pretax

 

Tax expense (benefit) at statutory rate

 $(55)  21.0% $402   21.0%

State and local income taxes, net of federal tax benefit

  114   (43.5)%  117   6.1%

Rate difference on foreign income (loss)

  3   (1.3)%  13   0.7%

Dividend Income

  (19)  7.4%  (21)  (1.1)%

Income from controlled foreign corporation

  12   (4.4)%  56   2.9%

Insurance

  16   (6.3)%  16   0.8%

Other

  1   (0.6)%  (1)  0.0%

Total tax expense

 $72   (27.7)% $582   30.4%

 

 

Components of total tax expense (benefit) are as follows:

  

Year ended June 30,

 

(dollars in thousands)

 

2025

  

2024

 

Current tax expense (benefit) - U.S.

 $(745) $48 

Current tax expense (benefit) - State U.S.

  116   117 

Current tax expense (benefit) - non-U.S.

  (3)  82 

Deferred tax expense (benefit) - U.S.

  687   329 

Deferred tax expense (benefit) - non-U.S.

  17   6 

Total tax expense (benefit)

 $72  $582 

 

Components of the Company’s deferred assets and liabilities are as follows:

 

  

June 30,

 

(dollars in thousands)

 

2025

  

2024

 

Deferred Income Tax Assets:

        

Accumulated depreciation

 $122  $126 

Investments in securities at fair value

  1,006   857 

Accrued expenses

  31   66 

Product start-up costs

  110   103 

Share-based compensation expense

  188   162 

Other

  92   67 

Capital loss carryover

  -   786 

Total Deferred Tax Assets

  1,549   2,167 

Deferred Income Tax Liabilities:

        

Prepaid expenses

 $(89) $(82)

Foreign tax on undistributed earnings

  (209)  (252)

Total Deferred Tax Liabilities

  (298)  (334)

Net Deferred Tax Asset

 $1,251  $1,833 
         

Amounts recognized in the Consolidated Balance Sheets:

        

Deferred tax asset

 $1,268  $1,833 

Deferred tax liability

  17   - 

Net Deferred Tax Asset

 $1,251  $1,833 

 

Carryovers

 

For U.S. federal income tax purposes, the Company expects to carry back capital loss carryovers of approximately $4.8 million to offset prior year capital gains. At June 30, 2025, the Company has no U.S. federal net operating loss carryovers or capital loss carryovers. For Canadian income tax purposes, USCAN has no net operating loss carryovers or capital loss carryovers.

 

Additional Disclosures

 

A valuation allowance is provided when it is more likely than not that some portion of the deferred tax amount will not be realized. There was no valuation allowance included at June 30, 2025, or at  June 30, 2024.

 

Uncertain income tax positions

 

The Company is subject to U.S. federal income tax, state tax jurisdictions within the U.S., and taxes in Canada. The Company maintains a reserve for uncertain tax positions. As of June 30, 2025, and June 30, 2024, the total reserve for uncertain tax positions, including interest and penalties, and net of federal benefits, was $891,000 and $785,000, respectively, which is included within long-term liabilities on the Consolidated Balance Sheets.

 

The reserve as of June 30, 2025, relates to the Company’s uncertain tax positions for income tax matters. The Company believes the reserve for uncertain tax positions, including interest and penalties, and net of federal benefits, of $891,000 as of June 30, 2025, adequately covers open tax years and uncertain tax positions up to and including fiscal 2025 for major taxing jurisdictions. As of June 30, 2025, the entire $891,000 of unrecognized tax benefits, including interest and penalties and net of federal benefit, if recognized, would impact the Company’s effective income tax rate.

 

The Company's activity was as follows:

 

  

Year ended June 30,

 

(dollars in thousands)

 

2025

  

2024

 

Beginning Balance

 $785  $671 

Increases related to prior year tax positions

  106   - 

Increases related to current year tax positions

  -   114 

Ending Balance

 $891  $785 

 

The Company continues to follow its policy of recognizing interest and penalties accrued on tax positions as a component of income taxes on the Consolidated Statements of Operations. The amount of accrued interest and penalties associated with the Company’s tax positions was $421,000 and $277,000 as of June 30, 2025, and June 30, 2024, respectively. The tax years from 2021 through 2024 remain open to examination by the U.S. Federal tax jurisdictions to which the Company is subject. The tax years from 2019 through 2024 remain open to examination by the non-U.S. Federal tax jurisdictions to which the Company is subject. For jurisdictions with unfiled tax returns, the statutes of limitations remain open indefinitely.