Note 8 - Income Taxes

12 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 8. Income Taxes

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial accounting purposes and the amounts used for income tax reporting. Significant components of the Company’s deferred tax assets are as follows:

	June 30,
	2014			2013
Deferred Tax Assets
Net operating loss	$	14,661		$	14,788
Capital loss carryover		-			1,146
Valuation adjustment on investment		737			685
Depreciation		(137	)		40
Inventory		261			434
Other		540			542
Valuation allowance		(16,062	)		(17,635	)
Total deferred tax asset		-			-
Less current portion		-			-
Net long-term deferred tax asset	$	-		$	-

Net operating losses (“NOL”) of approximately $38,200 will expire beginning in 2024 for federal purposes. State NOL’s of approximately $22,900 expire beginning in 2015 through 2031 depending on the state in which the NOL’s were generated. The Company also had capital losses of $2,868 which expired unused in 2014. The Company files a consolidated U.S. federal income tax return; however, the various state tax returns are filed on a stand-alone basis for the Company and its subsidiaries. MDC will fully utilize its remaining state NOL’s to offset a portion of its taxable income in the fiscal year ended June 30, 2014 state tax return. This utilization of the NOL deferred tax asset and the release of the corresponding valuation allowance resulted in a state income tax expense of approximately $81 for MDC, representing substantially all of the Company’s income tax expense of $89 in the fiscal year ended June 30, 2014.

Realization of the NOL carryforwards and other deferred tax temporary differences is contingent on future taxable earnings. The Company’s deferred tax asset was reviewed for expected utilization using a “more likely than not” approach by assessing the available positive and negative evidence surrounding its recoverability. Accordingly, a valuation allowance has been recorded against the Company’s deferred tax asset, as it was determined based upon past and present taxable losses that it was “more likely than not” that the Company’s deferred tax assets would not be realized. The valuation allowance was increased to the full carrying amount of the Company’s deferred tax assets in the fiscal year ended June 30, 2009. In future years, if the deferred tax assets are determined by management to be “more likely than not” to be realized, the recognized tax benefits relating to the reversal of the valuation allowance as of June 30, 2014 will be recorded. The Company will continue to assess and evaluate strategies that will enable the deferred tax asset, or portion thereof, to be utilized, and will reduce the valuation allowance appropriately as such time when it is determined that the “more likely than not” criteria is satisfied.

The components of the provision for income taxes consists of the following:

	For the fiscal year ended June 30,
	2014			2013
Current - Federal	$	-		$	-
Current - State and local		89			17
Deferred - Federal and state		(422	)		(466	)
Change in valuation allowance		422			466
Income tax expense, net	$	89		$	17

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

	For the fiscal year
	ended June 30,
	2014			2013
Statutory federal income tax rate		34	%		34	%
Statutory state income tax rate		6	%		6	%
Effective state income tax rate		40	%		16	%
Change in valuation allowance		(45	)%		(52	)%
Non-deductible expenses		5	%		12	%
Effective income tax rate		40	%		16	%

There were no significant uncertain tax positions taken, or expected to be taken, in a tax return that would be determined to be an unrecognized tax benefit taken or expected to be taken in a tax return that should have been recorded on the Company’s consolidated financial statements for the year ended June 30, 2014. Additionally, there were no interest or penalties outstanding as of or for each of the fiscal years ended June 30, 2014 and 2013.

The latest three years of Federal and four years of state tax returns filed for the fiscal years ended through June 30, 2013 are currently open. The tax returns for the year ended June 30, 2014 will be filed by March 15, 2015.