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Income Taxes | 12 Months Ended
--- | ---
Jun. 30, 2017
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes For financial reporting purposes, income before income taxes includes the following components:
| Year ended June 30, |
| 2017 |  | 2016 |
Pretax income: |  |  |  |  |  |
United States | $ | (485,966 | ) | $ | 1,389,111 |
Foreign |  | 3,847,752 |  |  | 224,779 |
Income before income taxes | $ | 3,361,786 |  | $ | 1,613,890 |
The components of the provision for income taxes are as follows:
|  | Year ended June 30, |
|  | 2017 |  |  | 2016 |
Current: |  |  |  |  |  |
Federal tax |  | $ | 98,787 |  |  | $ | 38,968 |
State |  |  | — |  |  |  | — |
Foreign |  |  | 1,053,617 |  |  |  | 160,307 |
Total current |  |  | 1,152,404 |  |  |  | 199,275 |
Deferred: |  |  |  |  |  |  |  |
Federal tax |  |  | (5,384,171 | ) |  |  | — |
State |  |  | (121,000 | ) |  |  | — |
Foreign |  |  | 11,467 |  |  |  | — |
Total deferred |  |  | (5,493,704 | ) |  |  | — |
Total income tax (benefit) |  | $ | (4,341,300 | ) |  | $ | 199,275 |
The reconciliation of income tax computed at the U.S federal statutory rates to income tax expense is as follows:
|  | Year ended June 30, |
|  | 2017 |  |  | 2016 |
U.S. federal statutory tax rate |  |  | 34 | % |  |  | 34 | %
Income tax provision reconciliation: |  |  |  |  |  |  |  |
Tax at statutory rate: |  | $ | 1,143,010 |  |  | $ | 548,722 |
Net foreign income subject to lower tax rate |  |  | (464,335 | ) |  |  | (6,235 | )
State income taxes, net of federal benefit |  |  | 2,418,932 |  |  |  | (18,200 | )
Valuation allowance |  |  | (8,085,000 | ) |  |  | 182,000 |
Federal research and development and other credits |  |  | (118,128 | ) |  |  | (16,961 | )
Stock-based compensation |  |  | 100,469 |  |  |  | 16,759 |
Change in fair value of derivative warrants |  |  | 158,965 |  |  |  | 17,834 |
Acquisiton costs |  |  | 75,332 |  |  |  | — |
Other permanent differences |  |  | (43,295 | ) |  |  | 9,726 |
Other, net |  |  | 472,750 |  |  |  | (534,370 | )
|  | $ | (4,341,300 | ) |  | $ | 199,275 |
The Company intends to permanently invest earnings generated from its foreign Chinese and Latvian operations, and, therefore, has not previously provided for United States taxes on the related earnings. However, if in the future the Company changes such intention, the Company would provide for and pay additional United States taxes at that time. The Company’s Chinese subsidiaries are governed by the Income Tax Law of the People’s Republic of China concerning the privately run and foreign invested enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments. No deferred tax provision has been recorded for China as the effect is deemed de minimis. The Company’s Latvian subsidiary is governed by the Law of Corporate Income Tax of Latvia, which is applicable to privately run and foreign invested enterprises, and which generally subjects such enterprises to a statutory rate of 15% on income reported in the statutory financial statements after appropriate tax adjustments. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows at June 30:
|  | 2017 |  |  | 2016 |
Deferred tax assets: |  |  |  |  |  |  |  |
Net operating loss and credit carryforwards |  | $ | 29,014,000 |  |  | $ | 32,440,000 |
Stock-based compensation |  |  | 943,000 |  |  |  | 813,000 |
R&D and other credits |  |  | 1,983,000 |  |  |  | 1,517,000 |
Capitalized R&D expenses |  |  | 562,000 |  |  |  | 576,000 |
Inventory |  |  | 243,000 |  |  |  | 177,000 |
Accrued expenses and other |  |  | 407,091 |  |  |  | 492,000 |
Gross deferred tax assets |  |  | 33,152,091 |  |  |  | 36,015,000 |
Valuation allowance for deferred tax assets |  |  | (27,886,000 | ) |  |  | (35,971,000 | )
Total deferred tax assets |  |  | 5,266,091 |  |  |  | 44,000 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Depreciation and other |  |  | (1,187,440 | ) |  |  | (44,000 | )
Intangible assets |  |  | (3,976,000 | ) |  |  | — |
Total deferred tax liabilities |  |  | (5,163,440 | ) |  |  | (44,000 | )
Net deferred tax asset |  | $ | 102,651 |  |  | $ | — |
In assessing the potential future recognition of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of approximately $84 million prior to the expiration of net operating loss carry-forwards from 2019 through 2035. Based on the level of historical taxable income, management has provided for a valuation adjustment against the deferred tax assets of $27,886,000 at June 30, 2017, a decrease of approximately $8,085,000 as compared to June 30, 2016. The net deferred tax asset results from federal and state tax credits with indefinite carryover periods that management expects to utilize in a future period. The reduction in the valuation allowance for deferred tax assets as compared to the prior year is primarily the result of deferred tax liabilities recorded in conjunction with the acquisition of ISP. State income tax expense disclosed on the effective tax rate reconciliation above includes state deferred taxes that are offset by a full valuation allowance. At June 30, 2017, in addition to net operating loss carry forwards, the Company also has research and development credit carry forwards of approximately $1,600,000, of which $38,505 will expire in fiscal 2019 and the remainder will expiration from 2020 through 2036. A portion of the net operating loss carry forwards may be subject to certain limitations of the Internal Revenue Code Sections 382 and 385 which would restrict the annual utilization in future periods due principally to changes in ownership in prior periods. The Company has not recognized a liability for uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits or penalties has not been provided since there has been no unrecognized benefit or penalty. If there were an unrecognized tax benefit or penalty, the Company would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company files U.S. Federal income tax returns, and returns in various states and foreign jurisdictions. The Company’s open tax years subject to examination by the Internal Revenue Service and the Florida Department of Revenue generally remain open for three years from the date of filing.

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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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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