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Note 11 - Income Taxes | 12 Months Ended
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Jun. 30, 2019
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | NOTE 11 — INCOME TAXES The following information is provided for the years ended June 30:
(In thousands) |  | 2019 |  |  | 2018 |
Components of (loss) before income taxes: |  |  |  |  |  |  |  |
United States |  | $ | (23,005 | ) |  | $ | (23,332 | )
Foreign |  |  | 737 |  |  |  | — |
(Loss) before income taxes |  | $ | (22,268 | ) |  | $ | (23,332 | )
Provision for income taxes: |  |  |  |  |  |  |  |
Current |  | $ | 88 |  |  | $ | -- |
U.S. federal |  |  | 221 |  |  |  | 922 |
State and local |  |  | 132 |  |  |  | 35 |
Total current |  |  | 441 |  |  |  | 957 |
Deferred |  |  | (6,370 | ) |  |  | (4,748 | )
Total provision for income taxes |  | $ | (5,929 | ) |  | $ | (3,791 | )
(In thousands) |  | 2019 |  |  | 2018 |
Reconciliation to federal statutory rate: |  |  |  |  |  |  |  |
Federal statutory tax rate |  |  | 21.0 | % |  |  | 27.6 | %
State and local taxes, net of federal benefit |  |  | 3.3 |  |  |  | 1.1 |
Foreign operations |  |  | (0.3 | ) |  |  | -- |
Federal tax credits |  |  | 0.8 |  |  |  | 0.9 |
Valuation allowance |  |  | 3.8 |  |  |  | 3.5 |
Domestic production activities deduction |  |  | -- |  |  |  | 0.6 |
Uncertain tax position activity |  |  | 0.3 |  |  |  | 0.4 |
Shared based compensation |  |  | (1.3 | ) |  |  | (1.3 | )
Tax rate changes |  |  | (0.2 | ) |  |  | (14.2 | )
Other |  |  | (0.8 | ) |  |  | (2.3 | )
Effective tax rate |  |  | 26.6 | % |  |  | 16.3 | %
The Tax Cuts and Jobs Act (the “Act”) was signed into law in December 2017 and makes numerous changes to the Internal Revenue Code. Among other changes, the Act reduces the U.S. corporate income tax rate to 21% effective January 1, 2018. Because the Act became effective mid-way through the Company’s fiscal 2018 tax year, the Company will have a U.S. statutory income tax rate of 27.6% for fiscal 2018 and will have a 21% U.S statutory income tax rate for fiscal years thereafter. During the year ended June 30, 2018, the Company recognized a net deferred tax expense of $3,322,991 as a result of the revaluation of its deferred tax balances due to the tax rate changes caused by the Act. The company completed its accounting for the income tax effects of the Act during the year ended June 30, 2018. The components of deferred income tax assets and (liabilities) at June 30, 2019 and 2018 are as follows:
(In thousands) |  | 2019 |  |  | 2018 |
Uncertain tax positions |  | $ | 128 |  |  | $ | 119 |
Reserves against current assets |  |  | 1,800 |  |  |  | 1,348 |
Accrued expenses |  |  | 1,722 |  |  |  | 2,028 |
Interest |  |  | 388 |  |  |  | -- |
Deferred compensation |  |  | 308 |  |  |  | 402 |
Stock-based compensation |  |  | 926 |  |  |  | 1,296 |
State net operating loss carryover and credits |  |  | 2,374 |  |  |  | 2,194 |
Long term capital loss carryforward |  |  | 2,555 |  |  |  | 2,555 |
Goodwill, acquisition costs and intangible assets |  |  | 8,949 |  |  |  | 4,728 |
U.S. Federal net operating loss carryover and credits |  |  | 1,139 |  |  |  | 232 |
Deferred income tax asset before valuation allowance |  |  | 20,289 |  |  |  | 14,902 |
Valuation allowance |  |  | (3,820 | ) |  |  | (4,749 | )
Deferred income tax asset |  |  | 16,469 |  |  |  | 10,153 |
Depreciation |  |  | (2,169 | ) |  |  | (2,045 | )
Deferred income tax liability |  |  | (2,169 | ) |  |  | (2,045 | )
Net deferred income tax asset |  | $ | 14,300 |  |  | $ | 8,108 |
The Company has deferred tax assets for US federal net operating loss carry forwards of $914,000 and $187,000 at June 30, 2019 and June 30, 2018, respectively. The amount recognized this year of $727,000 has an indefinite carry forward period. The remainder of $187,000 was acquired from Virticus Corporation and will expire over a 3 -year period beginning in June 30, 2029. The acquired federal net operating loss is subject to Internal Revenue Code Section 382. The Company has determined, more likely than not, the amount will be realized before expiration. The Company has deferred tax assets for research and development credits of $225,000, and $45,000, at June 30, 2019 and June 30, 2018, respectively. The amount recognized this year of $180,000 has a 15 year carry forward. The remainder of $45,000 was acquired from Virticus Corporation and will expire over a 2 -year period beginning June 30, 2029. The acquired credit is limited by Internal Revenue Code Section 382. The Company has determined, more likely than not, the amount will be realized before expiration. The Company has state net operating loss carryovers and credits of $2,374,000 and $2,194,000 at June 30, 2019 and June 30, 2018, respectively. The amount recognized in fiscal 2019 relates to net deferred tax assets of $180,000 of various state net operating losses. Also related to the acquisition of Virticus Corporation, the Company has recorded a deferred state income tax asset related to a state net operating loss carryover and a state research and development credit in Oregon in the amount of $108,000 and $108,000, for fiscal years 2019 and 2018, respectively. The Company has determined this asset more likely than not, will not be realized and that a full valuation reserve is required. The Oregon net operating loss will expire over a period of 4 years, beginning in June 30, 2027. As of June 30, 2019, and 2018, the Company has recorded a deferred state income tax asset net of federal tax benefits related to non-refundable New York state tax credits in the amount of $2,086,000 and $2,086,000, respectively. These credits do not expire, but pursuant to New York state legislation enacted in fiscal 2014, the Company has determined that this asset, more likely than not, will not be realized. As of June 30, 2019, and 2018, the Company has recorded a full valuation reserve in the amount of $2,086,000 and $2,086,000, respectively. During fiscal 2015, the Company generated a capital loss from the sale of a Canadian subsidiary. During fiscal 2019, the Company entered into an agreement to sell its New Windsor, NY facility, which is expected to close in the first quarter of fiscal 2020 and result in a taxable capital gain. The Company expects to use $929,000 of the capital loss deferred tax asset, and therefore, released a valuation allowance for this amount this year. The remaining capital loss carryforward deferred tax asset of $1,626,000 has a full valuation allowance established against it because the Company has no expectation of generating capital gains to utilize the loss before it expires at the end of June 30, 2020. Considering all issues discussed above, the Company has recorded valuation reserves of $3,820,000 and $4,749,000 as of June 30, 2019 and 2018, respectively. At June 30, 2019, tax, interest, and penalties, net of potential federal tax benefits, were $586,000, $245,000, and $151,000, respectively, of the total reserve for uncertain tax positions of $982,000. The entire uncertain tax position of $586,000, net of federal tax benefit, would impact the effective tax rate if recognized. At June 30, 2018, tax, interest, and penalties, net of potential federal tax benefits, were $651,000, $259,000, and $159,000 respectively, of the total reserve for uncertain tax positions of $1,069,000. The entire uncertain tax position of $651,000 net of federal tax benefit, would impact the effective tax rate if recognized. The liability for uncertain tax position is included in Other Long-Term Liabilities. The Company is recording estimated interest and penalties related to potential underpayment of income taxes as a component of tax expense in the Consolidated Statements of Operations. The Company recognized a $65,000 net tax benefit in fiscal 2019 and $20,000 net tax benefit in fiscal 2018, related to the change in reserves for uncertain tax positions. The Company recognized interest net of federal benefit and penalties of $14,000 and $7,000, respectively, in fiscal 2019 and $9,000 and $35,000, respectively, in fiscal 2018. The reserve for uncertain tax positions is not expected to change significantly in the next twelve months. The tax activity in the liability for uncertain tax positions was as follows:
(in thousands) |  | 2019 |  |  | 2018 |
Balance at beginning of the fiscal year |  | $ | 736 |  |  | $ | 842 |
Decreases — tax positions in prior period |  |  | (120 | ) |  |  | (185 | )
Increases — tax positions in current period |  |  | 59 |  |  |  | 41 |
Increases – tax positions in prior period |  |  | --- |  |  |  | 42 |
Settlements and payments |  |  | --- |  |  |  | (4 | )
Lapse of statute of limitations |  |  | --- |  |  |  | — |
Balance at end of the fiscal year |  | $ | 675 |  |  | $ | 736 |
The Company files a consolidated federal income tax return in the United States, and files various combined and separate tax returns in several state and local jurisdictions. With limited exceptions, the Company is no longer subject to U.S. Federal, state and local tax examinations by tax authorities for fiscal years ending prior to June 30, 2016. The Internal Revenue Service completed the audit of the tax year ended June 30, 2016.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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