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10. Income Taxes | 12 Months Ended
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Jun. 30, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | 10. Income Taxes The provision for income taxes consists of the following components:
|  | Years Ended June 30, |
|  | 2020 |  |  | 2019 |
|  |  | (In thousands) |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (2 | ) |  | $ | – |
State |  |  | 4 |  |  |  | 3 |
Foreign |  |  | 142 |  |  |  | 138 |
|  |  | 144 |  |  |  | 141 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | – |  |  |  | – |
State |  |  | – |  |  |  | – |
Foreign |  |  | – |  |  |  | – |
Provision for income taxes |  | $ | 144 |  |  | $ | 141 |
The following table presents U.S. and foreign income (loss) before income taxes:
|  | Years Ended June 30, |
|  | 2020 |  |  | 2019 |
|  | (In thousands) |
United States |  | $ | (7,048 | ) |  | $ | (623 | )
Foreign |  |  | (3,546 | ) |  |  | 356 |
Loss before income taxes |  | $ | (10,594 | ) |  | $ | (267 | )
The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows:
|  | Years Ended June 30, |
|  | 2020 |  |  | 2019 |
|  | (In thousands) |
Deferred tax assets: |  |  |  |  |  |  |  |
Tax losses and credits |  | $ | 20,640 |  |  | $ | 20,158 |
Reserves not currently deductible |  |  | 1,222 |  |  |  | 1,366 |
Deferred compensation |  |  | 986 |  |  |  | 383 |
Inventory capitalization |  |  | 631 |  |  |  | 481 |
Acquisition costs |  |  | – |  |  |  | 91 |
Depreciation and amortization |  |  | 790 |  |  |  | 8 |
Other |  |  | 130 |  |  |  | 151 |
Gross deferred tax assets |  |  | 24,399 |  |  |  | 22,638 |
Valuation allowance |  |  | (24,056 | ) |  |  | (22,353 | )
Deferred tax assets, net |  |  | 343 |  |  |  | 285 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
State taxes |  |  | (343 | ) |  |  | (285 | )
Deferred tax liabilities |  |  | (343 | ) |  |  | (285 | )
Net deferred tax assets (liabilities) |  | $ | – |  |  | $ | – |
We have recorded a valuation allowance against our net deferred tax assets, due to uncertainties surrounding the realization of the deferred tax assets. The following table presents a reconciliation of the provision for income taxes to taxes computed at the U.S. federal statutory rate:
|  | Years Ended June 30, |
|  | 2020 |  |  | 2019 |
|  | (In thousands) |
Statutory federal provision (benefit) for income taxes |  | $ | (2,224 | ) |  | $ | (56 | )
Increase (decrease) resulting from: |  |  |  |  |  |  |  |
Officer compensation |  |  | – |  |  |  | 10 |
Stock options |  |  | (121 | ) |  |  | (223 | )
Other permanent differences |  |  | 10 |  |  |  | 15 |
Change in valuation allowance |  |  | 1,467 |  |  |  | 289 |
Foreign tax credit |  |  | (67 | ) |  |  | (72 | )
Global intangible low-tax income inclusion |  |  | 86 |  |  |  | 76 |
Controlled foreign corporation inclusion |  |  | 4 |  |  |  | – |
Foreign tax rate variances |  |  | 886 |  |  |  | 64 |
Other |  |  | 103 |  |  |  | 38 |
Provision for income taxes |  | $ | 144 |  |  | $ | 141 |
Due to the “change of ownership” provision of the Tax Reform Act of 1986, utilization of our net operating loss (“NOL”) carryforwards and tax credit carryforwards may be subject to an annual limitation against taxable income in future periods. Due to the annual limitation, a portion of these carryforwards may expire before ultimately becoming available to reduce future income tax liabilities. The following table presents our NOLs:
|  |  | June 30, |
|  |  | 2020 |
|  |  |  | (In thousands) |
Federal |  |  | $ | 92,824 |
State |  |  | $ | 14,560 |
For federal income tax purposes, our NOL carryovers generated for tax years beginning before July 1, 2018 will begin to expire in the fiscal year ending June 30, 2021. Of our federal NOLs as of June 30, 2020 in the table above, approximately $51,900,000 will expire by June 30, 2023. Pursuant to the Tax Cuts and Jobs Act (the “2017 Act”) enacted by the U.S. federal government in December 2017, for federal income tax purposes, NOL carryovers generated for our tax years beginning after June 30, 2018 can be carried forward indefinitely but will be subject to a taxable income limitation. For state income tax purposes, our NOLs began to expire in the fiscal year ended June 30, 2013. We continue to assert that our foreign earnings are indefinitely reinvested in our overseas operations and as such, deferred income taxes were not provided on undistributed earnings of certain foreign subsidiaries. The 2017 Act created a requirement that certain income earned by foreign subsidiaries, known as global intangible low-tax income (“GILTI”), must be included in the gross income of their U.S. shareholder. The FASB allows an accounting policy election of either recognizing deferred taxes for temporary differences expected to reverse as GILTI in future years or recognizing such taxes as a current-period expense when incurred. During the fiscal years ended June 30, 2020 and 2019, we elected to treat the tax effect of GILTI as a current-period expense when incurred. Unrecognized Tax Benefits The following table summarizes our liability for uncertain tax positions for the fiscal year ended June 30, 2020:
|  | Year Ended |
|  | June 30, 2020 |
|  |  | (In thousands) |
Balance as of June 30, 2019 |  | $ | 6,600 |
Change in balances related to uncertain tax positions |  |  | – |
Balance as of June 30, 2020 |  | $ | 6,600 |
At June 30, 2020, we had $6,600,000 of gross unrecognized tax benefits which was recorded as a reduction to deferred tax assets, and a corresponding reduction in our valuation allowance of $6,600,000. To the extent such portion of unrecognized tax benefits is recognized at a time such valuation allowance no longer exists, the recognition would reduce the effective tax rate. Our continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. During the fiscal years ended June 30, 2020 and 2019 we recorded an immaterial expense for interest and penalties related to income tax matters in the provision for income taxes. At June 30, 2020, we had approximately $244,000 of accrued interest and penalties related to uncertain tax positions. At June 30, 2020, our fiscal years ended June 30, 2017 through 2020 remain open to examination by the federal taxing jurisdiction and our fiscal years ended June 30, 2016 through 2020 remain open to examination by the state taxing jurisdictions. However, we have NOLs beginning in the fiscal year ended June 30, 2001 which would cause the statute of limitations to remain open for the year in which the NOL was incurred. Our fiscal years ended June 30, 2013 through 2020 remain open to examination by foreign taxing authorities. We currently do not anticipate that the amount of unrecognized tax benefits as of June 30, 2020 will significantly increase or decrease within the next 12 months.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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