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Income Taxes | 12 Months Ended
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Jun. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income tax expense for the fiscal years ended June 30, 2024 and 2023 consists of the following (in thousands):
| Years ended June 30,
| 2024 |  | 2023 |  |
Income Before Income Taxes: |  |  |  |  |
Domestic | $ | 2,940 |  |  | $ | 2,464 |  |  |
International | 1,410 |  |  | 1,535 |  |  |
| $ | 4,350 |  |  | $ | 3,999 |  |  |
Current Taxes: |  |  |  |  |
Federal | $ | 1,457 |  |  | $ | 2,012 |  |  |
State | 246 |  |  | 436 |  |  |
Foreign | 984 |  |  | 686 |  |  |
Total Current Income Tax Provision | $ | 2,687 |  |  | $ | 3,134 |  |  |
Deferred Taxes: |  |  |  |  |
Federal | $ | (1,281) |  |  | $ | (1,400) |  |  |
State | (151) |  |  | (303) |  |  |
Foreign | 158 |  |  | 28 |  |  |
Total Deferred Income Tax Provision | $ | (1,274) |  |  | $ | (1,675) |  |  |
Net Income Tax Provision | $ | 1,413 |  |  | $ | 1,459 |  |  |
The effective income tax rate for the fiscal years ended June 30, 2024 and 2023 differs from the U.S. Federal statutory income tax rate due to the following:
| Years ended June 30,
| 2024 |  | 2023 |  |
Federal statutory income tax rate | 21.0 | % |  | 21.0 | % |  |
State income taxes, net of federal benefit | 1.2 | % |  | 0.8 | % |  |
Foreign tax rate difference | 8.0 | % |  | 8.3 | % |  |
Tax return to provision true-up | (4.3) | % |  | 3.2 | % |  |
Limit on future stock compensation due to 162(m) | 2.8 | % |  | 4.3 | % |  |
Foreign withholding tax | 2.6 | % |  | 0.4 | % |  |
Other differences | 1.6 | % |  | (0.3) | % |  |
Revalue of deferred for change in federal tax rate | 0.0 | % |  | 0.1 | % |  |
Permanent differences: |  |  |  |  |
— stock-based compensation | (8.3) | % |  | 5.8 | % |  |
— current year section 162(m) limitation | 7.0 | % |  | 0.0 | % |  |
— foreign derived intangible income deduction | (0.7) | % |  | (5.8) | % |  |
— tax credits | (12.1) | % |  | (5.3) | % |  |
— meals and entertainment | 1.3 | % |  | 0.8 | % |  |
— removal of additional permanent reinvestment assertions | 1.2 | % |  | 0.3 | % |  |
— change in uncertain tax positions | 1.2 | % |  | 0.0 | % |  |
— accrual for foreign tax audits | 7.7 | % |  | 0.0 | % |  |
— other permanent differences | 1.8 | % |  | 2.1 | % |  |
Change in valuation allowance | 0.5 | % |  | 0.7 | % |  |
Net income tax provision | 32.5 | % |  | 36.5 | % |  |
The components of the deferred tax assets and liabilities as of June 30, 2024 and 2023 are as follows (in thousands):
| June 30,
| 2024 |  | 2023
Deferred tax assets: |  |  |
Federal, state, and foreign net operating loss carryovers | $ | 271 |  |  | $ | 250 |
Stock option compensation | 360 |  |  | 549 |
Section 174 costs | 2,578 |  |  | 955 |
Lease liability | 3,223 |  |  | 3,100 |
Accrued vacation, allowance for returns, bonuses & other | 2,119 |  |  | 3,005 |
Gross deferred tax asset | $ | 8,551 |  |  | $ | 7,859 |
Deferred tax liabilities: |  |  |
Patents and trademarks | $ | (30) |  |  | $ | (66) |
Property & equipment | (798) |  |  | (1,571) |
Right of use asset | (2,263) |  |  | (2,057) |
Other | (472) |  |  | (470) |
Gross deferred tax liabilities | (3,563) |  |  | (4,164) |
Less: valuation allowance | (720) |  |  | (704) |
Deferred tax assets, net | $ | 4,268 |  |  | $ | 2,991 |
The Company has adopted accounting guidance for uncertain tax positions ("UTPs") which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position. The measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition of the benefit. In the fiscal year ending June 30, 2024, the Company began recording a withholding tax obligation on its rebalanced commission payments to the U.S. parent company it has not obtained treaty rates for. The Company does not believe it will obtain treaty rates, but will also not be able to take a foreign tax credit at this time. Since the Company believes it is unlikely to receive treaty benefits, it has recorded the taxes, the foreign tax credit on those taxes, and a corresponding UTP against the foreign tax credit. The UTP totaling $0.1 million was recorded against the foreign tax credit as of June 30, 2024. If the Company is successful with its treaty benefit application or receives an opinion through appeals, competent authority, etc., it will remove the UTP at that time. The UTP recorded is the foreign taxes that will not be credited, but reduced by the benefit the Company will receive from deducting the taxes. The Company is also currently undergoing income tax audits in foreign jurisdictions. For the fiscal year ending June 30, 2024, the Company accrued a total $0.3 million related to foreign income tax audits. At this time, the Company believes this amount reflects the amount that is has more than 50% likelihood to be paid upon settlement including interest and penalties. The Company will continue to evaluate as the audits progress. The Company has reserved $0.4 million for taxes related to the UTPs as of June 30, 2024. There were no changes to the liability for UTPs for the fiscal year ended June 30, 2023. There were no unrecognized tax benefits for the fiscal years ended June 30, 2024 and 2023. During fiscal 2022, the Company removed its permanent reinvestment assertion in Japan. In fiscal 2024, the Company also removed its permanent reinvestment assertions in Taiwan and Australia and recorded the tax effects of that change. For Taiwan, the Company recorded provisions for withholding tax that it will pay to Taiwan upon payment of dividends. The Company did not record any unborn foreign tax credit related to Taiwan withholding tax. The Company believes any withholding tax paid on dividends will be ineligible for a foreign tax credit. The Company did not record any withholding tax to Australia upon the payment of dividends. There is a 15% withholding rate on unfranked dividends between Australia and Singapore, but the Company does not anticipate paying any unfranked dividends, so it has not recorded any withholding tax to Australia. The Company has also recorded income taxes to various states when the cash is repatriated from Taiwan and Australia. The Company did not record any federal income tax implications because any withholding tax on dividends will be ineligible for a foreign tax credit. The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2021 through present and the open tax years by state tax authorities include returns for fiscal years June 30, 2020 through present. In addition, the IRS and state tax authorities may examine net operating losses ("NOLs") for any previous years if utilized by the Company. The change in the valuation allowance were as follows (in thousands):
| Years ended June 30,
| 2023 |  | 2022 |  |
Beginning balance | $ | 704 |  |  | $ | 675 |  |  |
Increases | 16 |  |  | 29 |  |  |
Ending balance | $ | 720 |  |  | $ | 704 |  |  |
The change in valuation allowance during the fiscal year ended June 30, 2024 related to current year income in entities with a full valuation allowance along with a change to the United States valuation allowance based on the Company converting from a blended rate to a state-by-state provision. During the fiscal year ended June 30, 2023, the change in valuation allowance related to current year income in entities with a full valuation allowance along with a change to the United States valuation allowance based on updated projections and changes to the blended rate. As of June 30, 2024, the Company had utilized all of its Federal NOL carry-forwards. As of June 30, 2024, state NOLs were $5.6 million and foreign NOLs were $0.4 million. The total recognized tax benefit from settlement of stock-based awards for the fiscal years ending June 30, 2024 and 2023, was $0.2 million and $0.2 million, respectively. The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years of June 30, 2020 through June 30, 2024.

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