Note

. Income Taxes

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

	For the fiscal year
	ended June 30,
	2018			2017

Current - Federal	$	4		$	30
Current - State and local		170			306
Deferred - Federal and state		430			495
Change in valuation allowance		(278	)		(1,321	)
Income tax (benefit) expense, net	$	326		$	(490	)

December 22, 2017,

the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which significantly changed U.S. tax law. The Tax Act lowered the Company’s U.S. statutory federal income tax rate from

35%

21%

effective

January 1, 2018.

By operation of law, the Company will apply a blended U.S. statutory tax rate of

27.5%

for the fiscal year ended

June 30, 2018.

The Securities and Exchange Commission (“SEC”) Staff issued Staff Accounting Bulletin (“SAB”)

No.

118

December 22, 2017,

which allows companies to record provisional amounts during a measurement period

not

to extend beyond on year of the enactment date. Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in its financial statements

in accordance with SAB

No.

118.

As the Company collects and prepares necessary data, and interprets the Tax Act and any additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, the Company

may

make adjustments to the provisional amounts during the fiscal year ended

June 30, 2019.

Those adjustments

may

materially impact the Company’s provision for income taxes and effective tax rate in the period in with the adjustments are made. The accounting for the tax effects of the Tax Act will be completed by the measurement period provided in SAB

No.

118.

In the fiscal year ended

June 30, 2018,

the Company recognized a provision for income taxes of

$326,

$202

was considered a

one

-time provisional estimate under the Tax Act. The Company’s current tax provision includes a provisional

one

-time estimate of

$202

primarily relating to the impact of re-measuring the Company’s deferred tax balances to reflect the reduction in the U.S. statutory tax rate from

35%

21%

for years after

2017

and allowable alternative minimum tax carry forward credits. The Company re-measured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse. In addition, the Company elected to record certain deferred tax assets and liabilities related to the alternative minimum tax carry forward credits now allowed to be utilized in future taxable years. The expense associated with the re-measurement of the deferred taxes is provisional as of

June 30, 2018,

as the Company continues gathering the necessary information to complete the calculations.

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

	For the fiscal year
	ended June 30,
	2018			2017
Statutory federal income tax rate		27.5	%		34.0	%
Deferred tax effects from Tax Act		20.0	%		0.0	%
Statutory state income tax rate		7.0	%		6.0	%
Effective state income tax rate		9.8	%		10.0	%
Change in valuation allowance		(32.9	)%		(79.0	)%
Non-deductible expenses		1.0	%		3.0	%
Effective income tax rate		32.40	%		(26.0	)%

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,
	2018			2017
Deferred Tax Assets
Net operating loss	$	8,247		$	13,314
Capital loss carryover		21			31
Valuation adjustment on investment in iBio, Inc.		512			707
Depreciation		(223	)		(269	)
Inventory		105			139
Change in estimated fair value of derivative liability		3			201
Other		143			94
Valuation allowance		(8,137	)		(13,394	)
Total deferred tax asset, net	$	671		$	823

The Company has net operating losses (“NOL”) of approximately

$35,000

for federal purposes. State NOL’s of approximately

$10,200

expire beginning in

2018

through

2033

depending on the state in which the NOL’s were generated. The Company also has capital losses of

$77

which expire in

2020.

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 has fully utilized its state NOL’s resulting in taxable income on a state level basis.

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 taxable losses and inconsistent taxable income in the past few years, that it was “more likely than

not”

that the Company’s deferred tax assets would

not

be realized. As of

June 30, 2018

and

2017,

management determined that certain of the Company’s deferred tax assets were “more likely than

not”

to be realizable and the Company recognized deferred tax benefits related to the release of the valuation allowance on those assets of approximately

$185

and

$823,

respectively.

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 at such time when it is determined that the “more likely than

not”

criteria is satisfied.

There were

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, 2018.

Additionally, there were

interest or penalties outstanding as of or for each of the fiscal years ended

June 30, 2018

and

2017.

The latest

three

years of Federal and

four

years of state tax returns filed for the fiscal years ended through

June 30, 2017

are currently open except for the State of New Jersey tax filings for MDC which are currently under review for the open tax periods of

2014

through

2017.

The tax returns for the year ended

June 30, 2018

will be filed by

March 15, 2019.