INCOME TAXES

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 6 - INCOME TAXES

Income tax (benefit) provision for the years ended June 30, 2022, and 2021 consists of the following: 

	Year Ended June 30,
	2022			2021
Current income tax (benefit) expense:
Federal	$	(127,998	)	$	4,217,883
State		975			(525	)
Foreign		49,843			256,636
Total Current income tax expense (benefit)		(77,180	)		4,473,994
Deferred income tax (benefit) expense:
Federal		(876,513	)		142,242
State		(83,375	)		155,410
Foreign		–			267,649
Total deferred income tax expense (benefit)		(959,888	)		565,301
(Benefit) provision for income taxes	$	(1,037,068	)	$	5,039,295

The (benefit) provision 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,
	2022			2021
Federal income tax, at statutory rate of 21% applied to (loss) earnings before income taxes and extraordinary items	$	(982,130	)	$	4,929,611
State tax, net of federal tax benefit		(82,840	)		125,237
Nondeductible expenses		870			22,688
R&D credits		(46,643	)		(56,950	)
Global intangible low-taxed income		152,930			95,419
Foreign rate difference		(16,279	)		39,146
Others		(62,976	)		(13,523	)
Forgiveness of payroll protection plan loan		–			(102,333	)
Change in valuation allowance		–			–
(Benefit) provision for income taxes	$	(1,037,068	)	$	5,039,295

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, 2022			June 30, 2021
Deferred tax asset:
Net operating losses	$	737,258		$	170,649
State tax		–			–
Lease accounting, net		4,299			7,035
Intangibles		156,334			84,831
Tax credits		202,958			133,451
Inventory reserve		155,133			30,591
Other, net		145,679			12,693
Total deferred tax assets		1,401,661			439,250
Deferred tax liabilities:
Deferred state taxes		(46,565	)		(29,056	)
State tax		(205	)		(110	)
Property and equipment, net		(7,865	)		(22,536	)
Total deferred tax liabilities		(54,225	)		(51,702	)
Less valuation allowance		–			–
Net deferred tax asset	$	1,347,436		$	387,548

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, 2022 or 2021.

As of June 30, 2022, we have federal and state net operating loss carryforwards of approximately $3.3 million and $40,000, respectively. Under the Tax Cuts and Jobs Act, which was signed into law on December 22, 2017, the federal net operating loss of approximately $2.5 million, which was recognized on or after January 1, 2018, will carry forward indefinitely. The federal net operating loss of approximately $0.8 million, which was recognized on or before December 31, 2017, will expire through 2035. The state net operating loss of approximately $40,000 will begin to expire through 2042. 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, 2020	$	296,832
Gross increase		38,427
Balance as of June 30, 2021		335,259
Gross increase		29,789
Balance as of June 30, 2022	$	365,048

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.