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Income Taxes
 12 Months Ended
Jun. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

 

8.   Income Taxes

 

The provision (benefit) for income taxes consists of the following components: 

          
   Years Ended June 30, 
   2024   2023 
   (In thousands) 
Current:          
Federal  $–   $– 
State   380    294 
Foreign   332    308 
Total Current taxes  $712   $602 
Deferred:          
Federal   33    146 
State   –    – 
Foreign   –    – 
Provision for income taxes  $745   $748 

 

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

          
   Years Ended June 30, 
   2024   2023 
   (In thousands) 
United States  $(4,655)  $(9,168)
Foreign   884    936 
Loss before income taxes  $(3,771)  $(8,232)

 

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

          
   Years Ended June 30, 
   2024   2023 
   (In thousands) 
Deferred tax assets:          
Tax losses and credits  $8,984   $9,882 
Reserves not currently deductible   2,738    2,054 
Capitalized research and development expenses   7,511    6,975 
Deferred compensation   1,509    1,301 
Inventory capitalization   2,570    2,390 
Lease liabilities   2,299    2,848 
Depreciation and amortization   172    – 
Identified intangibles   1,172    446 
Other   98    263 
Gross deferred tax assets   27,053    26,159 
Valuation allowance   (24,731)   (22,532)
Deferred tax assets, net   2,322    3,627 
Deferred tax liabilities:          
State taxes   (395)   (518)
Right-of-use assets   (2,106)   (2,676)
Depreciation and amortization   –    (579)
Deferred tax liabilities   (2,501)   (3,773)
Net deferred tax assets (liabilities)  $(179)  $(146)

  

Our net deferred tax liability of $179,000 and $146,000 at June 30, 2024 and 2023, respectively, represents the excess of our indefinite-lived deferred tax liabilities over our indefinite-lived deferred tax assets, and are recorded in other non-current liabilities on the accompanying consolidated balance sheets at June 30, 2024 and 2023. Realization of deferred tax assets is dependent upon the generation of future taxable income. As required by ASC 740, we have evaluated the positive and negative evidence bearing upon our ability to realize the deferred tax assets as of June 30, 2024 and 2023. We have determined that it was more likely than not that Lantronix would not realize the deferred tax assets due to our cumulative losses and uncertainty of generating future taxable income.

 

The following table presents a reconciliation of the provision (benefit) for income taxes to taxes computed at the U.S. federal statutory rate: 

          
   Years Ended June 30, 
   2024   2023 
   (In thousands) 
Statutory federal provision (benefit) for income taxes  $(792)  $(1,729)
Increase (decrease) resulting from:          
State taxes   300    232 
Stock options   431    (283)
Change in valuation allowance   349    2,222 
Change in state tax rate   261    – 
Global intangible low-tax income inclusion   –    2 
Foreign tax rate variances   146    112 
Other   50    192 
Provision for income taxes  $745   $748 

 

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, 2024 and 2023, 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, 2024: 

     
   Year Ended 
   June 30, 2024 
   (In thousands) 
Balance as of June 30, 2023  $4,813 
Change in balances related to uncertain tax positions   (524)
Balance as of June 30, 2024  $4,289 

 

At June 30, 2024, we had $4,289,000 of gross unrecognized tax benefits which was recorded as a reduction to deferred tax assets, and a corresponding reduction in our valuation allowance of $4,289,000. The balance decreased from the prior year due to the expiration of certain federal research and development tax credit carryforwards. 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, 2024 and 2023, we recorded an immaterial expense for interest and penalties related to income tax matters in the provision for income taxes. At June 30, 2024, we had approximately $333,000 of accrued interest and penalties related to uncertain tax positions.

  

At June 30, 2024, our fiscal years ended June 30, 2021 through 2024 remain open to examination by the federal taxing jurisdiction and our fiscal years ended June 30, 2020 through 2024 remain open to examination by the state taxing jurisdictions. However, we have NOLs beginning in the fiscal year ended June 30, 2005 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, 2016 through 2024 remain open to examination by foreign taxing authorities. We currently do not anticipate that the amount of unrecognized tax benefits as of June 30, 2024 will significantly increase or decrease within the next 12 months.