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INCOME TAXES | 12 Months Ended
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Jun. 30, 2018
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | NOTE 1 2. INCOME TAXES The Company and its non-Canadian subsidiaries file a consolidated U.S. federal income tax return. USCAN and Galileo file separate tax returns in Canada. Provisions for income taxes include deferred taxes for temporary differences in the bases of assets and liabilities for financial and tax purposes resulting from the use of the liability method of accounting for income taxes. The U.S. statutory rate for the consolidated U.S. federal income tax return was approximately 34 percent for the fiscal year ended June 30, 2017. The current applicable Canadian statutory rate for the Canadian subsidiaries is approximately 26.5 percent. The Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act reduces the U.S. federal corporate tax rate from 35 percent to 21 percent, requires companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and creates new taxes on certain foreign sourced earnings. In the second quarter, the Company revised its estimated annual effective rate to reflect a change in its U.S. federal statutory rate from 34 percent to 21 percent. See further discussion in the Provisional amounts section below. The rate change is effective on January 1, 2018; therefore, the Company’s blended U.S. statutory tax rate for the fiscal year ended June 30, 2018, is approximately 28 percent. At June 30, 2018, the Company has not completed its accounting for the tax effects of enactment of the Act; however, in certain cases, as described below, the Company has made a reasonable estimate of the effects on existing deferred tax balances and the one-time transition tax. The Securities and Exchange Commission has issued guidance that allows for a measurement period of up to one year after the enactment date of the Act to finalize the recording of the related tax impacts. The final transitional impacts of the Act may differ from the initial estimates. Prior to the enactment of Act, the Company had not recorded U.S. income taxes on the undistributed earnings of the Company’s foreign subsidiaries. The earnings of the foreign subsidiaries were considered to be indefinitely reinvested, and as a result, no deferred tax liability was previously recorded. The Company has reevaluated its historic indefinite reinvestment assertion as a result of the enactment of the Act and determined that historical or future undistributed earnings of foreign subsidiaries are no longer considered to be indefinitely reinvested. As a result, for the period ended June 30, 2018, the Company recorded a deferred tax expense and liability related to foreign withholding taxes in the amount of approximately $57,000 for those undistributed earnings which are no longer considered indefinitely invested. The Act also established new tax provisions that become effective in future periods, including but not limited to eliminating the corporate alternative minimum tax, creating the base erosion anti-abuse tax (“BEAT”), establishing new limitations on deductible interest expense and certain executive compensation, creating a new provision designed to tax global intangible low-tax income (“GILTI”) and generally eliminating U.S. Federal income taxes on dividends from foreign subsidiaries. Under the new GILTI tax rules, an accounting policy election must be made to either treat taxes due on future GILTI inclusions in U.S. taxable income as a current period expense when incurred or reflect as a component of deferred taxes. This provision is effective for tax years beginning on or after January 1, 2018, which for the Company would be the fiscal year beginning on July 1, 2018 (fiscal 2019). The Company’s analysis of the new GILTI rules and its impacts is currently incomplete. Accordingly, the Company has not yet made a policy election regarding the treatment of the GILTI tax. Provisional amounts Deferred tax assets and liabilities: Certain domestic-related deferred tax assets and liabilities were remeasured in the second quarter of fiscal 2018 based on the rates at which they are expected to reverse in the future, which is generally 21 percent. The remeasurement at the lower tax rate on domestic-related deferred tax assets and liabilities resulted in a deferred tax benefit of approximately $1.4 million. However, the Company is still analyzing certain aspects of the Act and refining the calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. As a valuation allowance is recorded for the full amount of these net deferred tax assets, the remeasurement of the net deferred tax assets was offset by a corresponding remeasurement of the valuation allowance. Foreign tax effects: The one-time transition tax is based on total post-1986 earnings and profits (“E&P”) that were previously deferred from U.S. income taxes. The Company recorded a provisional amount for the one-time transition tax for foreign subsidiaries of $17,000. The Company has not yet completed its calculation of the total post-1986 E&P for these foreign subsidiaries. Further, the transition tax is based in part on the amount of those earnings held in cash and other specified assets. This amount may change when the calculations are finalized. Carryovers For U.S. federal income tax purposes at June 30, 2018, the Company has U.S. federal net operating loss carryovers of $4.7 million with $2.0 million and $2.7 million expiring in fiscal years 2035 and 2036, respectively. The Company has capital loss carryovers of $1.1 million with $750,000 and $348,000 expiring in fiscal years 2022 and 2023, respectively. The Company has charitable contribution carryovers totaling approximately $69,000 with $34,000; $19,000; $5,000; and $11,000 expiring in fiscal years 2019, 2020, 2021, and 2023, respectively. For Canadian income tax purposes, Galileo has net operating loss carryovers of $338,000 with $102,000; $44,000; $121,000; and $71,000 expiring in fiscal years 2027, 2030, 2036 and 2037, respectively. If certain changes in the Company's ownership should occur, there could be an annual limitation on the amount of net operating loss carryovers that could be utilized. Additional Disclosures A valuation allowance is provided when it is more likely than not that some portion of the deferred tax amount will not be realized. At June 30, 2018, and 2017, a valuation allowance of $1.7 million and $3.3 million, respectively, was included to fully reserve for net operating loss carryovers, other carryovers and certain book/tax differences in the balance sheet. The Company's components of income (loss) before tax by jurisdiction are as follows:
|  | Year ended June 30, |
(dollars in thousands) |  | 2018 |  |  | 2017 |
United States |  | $ | (645 | ) |  | $ | (188 | )
Canada |  |  | 1,531 |  |  |  | (339 | )
Total |  | $ | 886 |  |  | $ | (527 | )
The reconciliation of income tax computed at U.S. federal statutory rates to income tax expense is as follows:
|  | Year ended June 30, |
(dollars in thousands) |  | 2018 |  |  | % of Pretax |  |  | 2017 |  |  | % of Pretax |
Tax expense (benefit) at statutory rate |  | $ | 244 |  |  |  | 27.6 | % |  | $ | (179 | ) |  |  | 34.0 | %
Valuation allowance |  |  | (1,498 | ) |  |  | (169.2 | )% |  |  | 144 |  |  |  | (27.3 | )%
Income from controlled foreign corporation |  |  | 377 |  |  |  | 42.6 | % |  |  | 33 |  |  |  | (6.3 | )%
Tax on deemed repatriation |  |  | 17 |  |  |  | 1.9 | % |  |  | - |  |  |  | 0.0 | %
Rate changes |  |  | 1,217 |  |  |  | 137.5 | % |  |  | - |  |  |  | 0.0 | %
Canadian withholding tax |  |  | 63 |  |  |  | 7.1 | % |  |  | - |  |  |  | 0.0 | %
Non-taxable investment income |  |  | (270 | ) |  |  | (30.7 | )% |  |  | (15 | ) |  |  | 2.9 | %
Nondeductible meals and entertainment |  |  | 27 |  |  |  | 3.1 | % |  |  | 20 |  |  |  | (3.8 | )%
Other |  |  | 20 |  |  |  | 2.3 | % |  |  | 14 |  |  |  | (2.7 | )%
Total tax expense |  | $ | 197 |  |  |  | 22.2 | % |  | $ | 17 |  |  |  | (3.2 | )%
Components of total tax expense (benefit) are as follows:
|  | Year ended June 30, |
(dollars in thousands) |  | 2018 |  |  | 2017 |
Current tax expense - U.S. Federal |  | $ | 5 |  |  | $ | 6 |
Current tax expense - Non-U.S. |  |  | 142 |  |  |  | 11 |
Deferred tax expense - U.S. Federal |  |  | - |  |  |  | - |
Deferred tax expense - Non-U.S. |  |  | 50 |  |  |  | - |
Total tax expense |  | $ | 197 |  |  | $ | 17 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the Company’s deferred assets and liabilities are as follows:
|  | June 30, |
(dollars in thousands) |  | 2018 |  |  | 2017 |
Book/tax differences in the balance sheet |  |  |  |  |
Trading securities |  | $ | 39 |  |  | $ | 316 |
Prepaid expenses |  |  | (45 | ) |  |  | (92 | )
Accumulated depreciation |  |  | 162 |  |  |  | 166 |
Available-for-sale securities |  |  | (1,097 | ) |  |  | 228 |
Other investments |  |  | 45 |  |  |  | 355 |
Equity method investments |  |  | 13 |  |  |  | - |
Accrued expenses |  |  | 146 |  |  |  | 126 |
Product start-up costs |  |  | 60 |  |  |  | 117 |
Stock-based compensation expense |  |  | 4 |  |  |  | 6 |
Other |  |  | (73 | ) |  |  | - |
Tax Carryovers |  |  |  |  |  |  |  |
Net operating loss carryover |  |  | 1,069 |  |  |  | 1,690 |
Cumulative eligible capital carryover |  |  | - |  |  |  | 67 |
Charitable contributions carryover |  |  | 14 |  |  |  | 50 |
Capital loss carryover |  |  | 231 |  |  |  | 255 |
Valuation Allowance |  |  | (1,667 | ) |  |  | (3,284 | )
Net deferred tax liability |  | $ | (1,099 | ) |  | $ | - |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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