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Income Taxes
 12 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

8.            Income Taxes

 

The provision for income taxes consists of the following components: 

          
   Years Ended June 30, 
   2021   2020 
   (In thousands) 
Current:          
Federal  $8   $(2)
State   5    4 
Foreign   182    142 
 Total Current taxes   195    144 
Deferred:          
Federal   –    – 
State   –    – 
Foreign   –    – 
Provision for income taxes  $195   $144 

  

The following table presents U.S. and foreign income (loss) before income taxes: 

          
   Years Ended June 30, 
   2021   2020 
   (In thousands) 
United States  $(3,294)  $(7,048)
Foreign   (555)   (3,546)
Loss before income taxes  $(3,849)  $(10,594)

 

The tax effects of temporary differences that give rise to deferred tax assets and liabilities are as follows: 

          
   Years Ended June 30, 
   2021   2020 
   (In thousands) 
Deferred tax assets:          
Tax losses and credits  $20,281   $20,640 
Reserves not currently deductible   1,537    1,205 
Deferred compensation   1,579    986 
Inventory capitalization   748    631 
Lease liabilities   459    458 
Depreciation and amortization   1,572    790 
Other   285    130 
Gross deferred tax assets   26,461    24,840 
Valuation allowance   (25,588)   (24,056)
Deferred tax assets, net   873    784 
Deferred tax liabilities:          
State taxes   (388)   (343)
Right-of-use assets   (485)   (441)
Deferred tax liabilities   (873)   (784)
Net deferred tax assets (liabilities)  $–   $– 

 

We have recorded a valuation allowance against our 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, 
   2021   2020 
   (In thousands) 
Statutory federal provision (benefit) for income taxes  $(809)  $(2,224)
Increase (decrease) resulting from:          
Stock options   (320)   (121)
Other permanent differences   (9)   10 
Change in valuation allowance   1,285    1,467 
Foreign tax credit   (84)   (67)
Global intangible low-tax income inclusion   82    86 
Controlled foreign corporation inclusion   –    4 
Foreign tax rate variances   299    886 
Acquisition costs   53    – 
Other   (302)   103 
Provision for income taxes  $195   $144 

 

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, 
   2021 
   (In thousands) 
Federal  $91,974 
State  $11,038 

 

For federal income tax purposes, our NOL carryovers generated for tax years beginning before July 1, 2018 began to expire in the fiscal year ended June 30, 2021. Of our federal NOLs as of June 30, 2021 in the table above, approximately $51,862,000 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, 2021 and 2021, 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, 2021: 

     
   Year Ended 
   June 30, 2021 
   (In thousands) 
Balance as of June 30, 2020  $6,600 
Change in balances related to uncertain tax positions   – 
Balance as of June 30, 2021  $6,600 

 

At June 30, 2021, 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, 2021 and 2020, we recorded an immaterial expense for interest and penalties related to income tax matters in the provision for income taxes. At June 30, 2021, we had approximately $265,000 of accrued interest and penalties related to uncertain tax positions.

 

At June 30, 2021, our fiscal years ended June 30, 2018 through 2021 remain open to examination by the federal taxing jurisdiction and our fiscal years ended June 30, 2017 through 2021 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, 2014 through 2021 remain open to examination by foreign taxing authorities. We currently do not anticipate that the amount of unrecognized tax benefits as of June 30, 2021 will significantly increase or decrease within the next 12 months.