Entity information:
Note
7
. 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,
  
   
2017
    
2016
  
Deferred Tax Assets
  
 
 
 
  
 
 
 
Net operating loss
   $
13,314
     $
13,967
  
Capital loss carryover
    
31
      
31
  
Valuation adjustment on investment in iBio, Inc.
    
707
      
695
  
Depreciation
    
(269
 )    
(166
 )
Inventory
    
139
      
156
  
Change in estimated fair value of derivative liability
    
201
      
31
  
Other
    
94
      
-
  
Valuation allowance
    
(13,394
 )    
(14,714
 )
Total deferred tax asset, net
   $
823
     $
-
  
 
Net operating losses (“NOL”) of approximately
$35,600
will expire beginning in
2024
for federal purposes. State NOL’s of approximately
$15,200
expire beginning in
2017
through
2032
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. 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.
As of
June 30, 2017,
management determined that certain of the Company’s deferred tax assets were “more likely than
not”
to be realizable and the Company recognized a deferred tax benefit of approximately
$0.8
million related to the release of the valuation allowance on those assets. 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.
 
The components of the provision for income taxes consists of the following:
 
   
For the fiscal year
  
   
ended June 30,
  
   
2017
    
2016
  
                 
Current - Federal
   $
30
     $
20
  
Current - State and local
    
306
      
211
  
Deferred - Federal and state
    
495
      
114
  
Change in valuation allowance
    
(1,321
 )    
(114
 )
Income tax (benefit) expense, net
   $
(490
 )   $
231
  
 
A reconciliation of the statutory tax rate to the effective tax rate is as follows:
 
   
For the fiscal year
  
   
ended June 30,
  
   
2017
    
2016
  
Statutory federal income tax rate
    
34
 %    
34
 %
Statutory state income tax rate
    
6
 %    
6
 %
Effective state income tax rate
    
10
 %    
12
 %
Change in valuation allowance
    
(79
 )%    
(36
 )%
Non-deductible expenses
    
3
 %    
3
 %
Effective income tax rate
    
(26
 )%    
19
 %
 
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, 2017.
Additionally, there were
no
interest or penalties outstanding as of or for each of the fiscal years ended
June 30, 2017
and
2016.
 
The latest
three
years of Federal and
four
years of state tax returns filed for the fiscal years ended through
June 30, 2016
are currently open. The tax returns for the year ended
June 30, 2017
will be filed by
March 15, 2018.