6. INCOME TAXES

12 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 6 - INCOME TAXES

Income tax provision for the years ended June 30, 2021, and 2020 consists of the following:

	Year Ended June 30,
	2021			2020
Current income tax expense (benefit):
Federal	$	4,217,883		$	33,039
State		(525	)		2,475
Foreign		256,636			–
		4,473,994			35,514
Deferred income tax expense (benefit):
Federal		142,242			1,323,265
State		155,410			(293,773	)
Foreign		267,649			315,295
		565,301			1,344,787
Provision for income taxes	$	5,039,295		$	1,380,301

The provisions for income taxes reconciles to the amount computed by applying the effective federal statutory income tax rate to the income before provision for income taxes as follows:

	Year Ended June 30,
	2021			2020
Federal income tax, at statutory rate of 21% applied to earnings before income taxes and extraordinary items	$	4,929,611		$	1,533,352
State tax, net of federal tax benefit		125,237			128,406	)
Nondeductible expenses		22,688			(45,345	)
R&D credits		(56,950	)		(36,841	)
Global intangible low-taxed income		95,419			31,060
Foreign rate difference		39,146			74,256
Other		(13,523	)		53,943
Forgiveness of payroll protection plan loan		(102,333	)		–
Change in valuation allowance		–			(358,530	)
Provision (benefit) for income taxes	$	5,039,295		$	1,380,301

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

	June 30, 2021			June 30, 2020
Deferred tax asset:
Net operating losses	$	170,649		$	507,402
State tax		–			520
Lease accounting		7,035			10,078
Intangibles		84,831			38,154
Tax credits		133,451			346,091
Inventory reserve		30,591			103,450
Other, net		12,693			38,085
Total deferred tax assets		439,250			1,043,780
Deferred tax liabilities:
Deferred state taxes		(29,056	)		(61,692	)
State tax		(110	)		–
Fixed asset		(22,536	)		(43,900	)
Total deferred tax liabilities		(51,702	)		(105,592	)
Less valuation allowance		–			–
Net deferred tax asset	$	387,548		$	938,188

Deferred income tax assets and liabilities are recorded for differences between the financial statement and tax basis of the assets and liabilities that will result in taxable or deductible amounts in the future based on enacted laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We have evaluated the available evidence supporting the realization of our gross deferred tax assets, including the amount and timing of forecasted future taxable income. Management determined it is more likely than not that the federal deferred tax assets will be fully realized, and no valuation allowance is necessary as of June 30, 2021 or 2020.

As of June 30, 2021, we have federal net operating loss carryforwards of approximately $0.8 million and no state net operating loss carryforwards. Under the Tax Cuts and Jobs Act (the “Act”), which was signed into law on December 22, 2017, the federal net operating loss recognized on or after January 1, 2018 will carry forward indefinitely. The federal net operating loss of $0.8 million, which recognized on or before December 31, 2017, will expire through 2035, and the federal net operating loss recognized on or after January 1, 2018, which will carry forward indefinitely, is 0. The utilization of net operating loss carryforwards may be subject to limitations under provisions of the Internal Revenue Code Section 382 and similar state provisions.

We apply the provisions of ASC 740 related to accounting for uncertain tax positions, which prescribes a recognition threshold and measurement process for recording in the financial statements uncertain tax positions taken or expected to be taken in a tax return. Under this provision, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. Tax benefits of an uncertain tax position will not be recognized if it has less than a 50% likelihood of being sustained based on technical merits.

A reconciliation of the beginning and ending balance of unrecognized tax benefits, which have been considered in the Company's computation of its deferred tax assets, is as follows:

Balance as of June 30, 2019	$	275,262
Gross increase		21,570
Balance as of June 30, 2020		296,832
Gross increase		38,427
Balance as of June 30, 2021	$	335,259

We do not anticipate any material change in the total amount of unrecognized tax benefits to occur within the next twelve months. ASC 740 requires us to accrue interest and penalties where there is an underpayment of taxes based on our best estimate of the amount ultimately to be paid. Our policy is to recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. We have not recorded any interest or penalties as the liability associated with the unrecognized tax benefits is immaterial. We are subject to taxation in the U.S., and various state and foreign jurisdictions.