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INCOME TAXES | 12 Months Ended
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Jun. 30, 2019
Income Tax Disclosure [Abstract] |
Income Tax Disclosure [Text Block] | NOTE 13. 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 Tax Cuts and Jobs Act (“the Act”) was enacted on December 22, 2017. The Act reduced the U.S. federal corporate tax rate from 35 percent to 21 percent, required companies to pay a one-time transition tax on earnings of certain foreign subsidiaries that were previously tax deferred and created new taxes on certain foreign sourced earnings. The rate change was effective on January 1, 2018; therefore, the Company’s U.S. statutory tax rate for the fiscal year ended June 30, 2019, is 21 percent, while the rate for fiscal year 2018 was a blended rate of approximately 27.6 percent. The current applicable Canadian statutory rate for the Canadian subsidiaries is approximately 26.5 percent. As a result of the change in tax rate, 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. The Securities and Exchange Commission issued guidance in December 2017 that allowed 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. In certain cases, the Company had made a reasonable estimate of the effects on existing deferred tax balances and the one-time transition tax. The Company completed its accounting for the tax effects of enactment of the Act as of December 31, 2018. The final transitional impacts of the Act did not differ materially 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 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 the fiscal year ended June 30, 2019, 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 global intangible low-tax income (“GILTI”) tax rules established by the Act, the Company needed make two accounting policy elections. The Company had to elect 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. The Company elected to include GILTI taxes due as a current period expense when incurred. The Company also had to make an accounting policy election to either use the incremental cash tax savings approach or the tax law ordering approach when assessing the realization of net operating losses related to GILTI. The Company elected to use the tax law ordering approach. Carryovers For U.S. federal income tax purposes at June 30, 2019, the Company has U.S. federal net operating loss carryovers of $7.2 million with $2.0 million and $2.7 million expiring in fiscal years 2035 and 2036, respectively, and $2.5 million with no expiration. Certain limitations apply to the utilization of net operating losses with no expiration, which were generated after fiscal year 2018. The Company has capital loss carryovers of $1.1 million with $744,000 and $348,000 expiring in fiscal years 2022 and 2023, respectively. The Company has charitable contribution carryovers totaling approximately $40,000 with $19,000; $5,000; $11,000 and $5,000 expiring in fiscal years 2020, 2021, 2023, and 2024, respectively. For Canadian income tax purposes, USCAN has net operating loss carryovers of $236,000 that expire in fiscal year 2039 and capital loss carryovers of $75,000 with no expiration. Also for Canadian income tax purposes, Galileo has net operating loss carryovers of $452,000 with $102,000; $44,000; $122,000; $72,000 and $112,000 expiring in fiscal years 2027, 2030, 2036, 2037 and 2038, 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, 2019, and 2018, a valuation allowance of $2.1 million and $1.7 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) |  | 2019 |  |  | 2018 |
United States |  | $ | (1,613 | ) |  | $ | (645 | )
Canada |  |  | (2,803 | ) |  |  | 1,531 |
Total |  | $ | (4,416 | ) |  | $ | 886 |
The reconciliation of income tax computed at U.S. federal statutory rates to income tax expense is as follows:
(dollars in thousands) |  | 2019 |  |  | % of Pretax |  |  | 2018 |  |  | % of Pretax |
Tax expense (benefit) at statutory rate |  | $ | (927 | ) |  |  | 21.0 | % |  | $ | 244 |  |  |  | 27.6 | %
Tax benefit from change in foreign unrealized gain |  |  | (679 | ) |  |  | 15.4 | % |  |  | - |  |  |  | 0.0 | %
Change in valuation allowance |  |  | 394 |  |  |  | (8.9 | )% |  |  | (1,498 | ) |  |  | (169.2 | )%
Rate difference on foreign deferred income |  |  | 327 |  |  |  | (7.4 | )% |  |  | 13 |  |  |  | 1.5 | %
Rate difference on foreign income |  |  | (154 | ) |  |  | 3.5 | % |  |  | (16 | ) |  |  | (1.8 | )%
Nondeductible meals and entertainment |  |  | 13 |  |  |  | (0.3 | )% |  |  | 27 |  |  |  | 3.1 | %
Canadian withholding tax |  |  | 5 |  |  |  | (0.1 | )% |  |  | 63 |  |  |  | 7.1 | %
Income from controlled foreign corporation |  |  | 5 |  |  |  | (0.1 | )% |  |  | 377 |  |  |  | 42.6 | %
Non-taxable investment income |  |  | (3 | ) |  |  | 0.1 | % |  |  | (284 | ) |  |  | (32.2 | )%
Tax on deemed repatriation |  |  | - |  |  |  | 0.0 | % |  |  | 17 |  |  |  | 1.9 | %
Rate changes |  |  | - |  |  |  | 0.0 | % |  |  | 1,217 |  |  |  | 137.5 | %
Other |  |  | 42 |  |  |  | (1.1 | )% |  |  | 37 |  |  |  | 4.1 | %
Total tax expense (benefit) |  | $ | (977 | ) |  |  | 22.1 | % |  | $ | 197 |  |  |  | 22.2 | %
Components of total tax expense (benefit) are as follows:
|  | Year ended June 30, |
(dollars in thousands) |  | 2019 |  |  | 2018 |
Current tax expense - U.S. Federal |  | $ | 4 |  |  | $ | 5 |
Current tax expense (benefit) - Non-U.S. |  |  | (15 | ) |  |  | 142 |
Deferred tax expense - U.S. Federal |  |  | - |  |  |  | - |
Deferred tax expense (benefit) - Non-U.S. |  |  | (966 | ) |  |  | 50 |
Total tax expense (benefit) |  | $ | (977 | ) |  | $ | 197 |
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) |  | 2019 |  |  | 2018 |
Book/tax differences in the balance sheet |  |  |  |  |  |  |  |
Investments in securities at fair value |  | $ | (99 | ) |  | $ | (1,058 | )
Prepaid expenses |  |  | (45 | ) |  |  | (45 | )
Accumulated depreciation |  |  | 169 |  |  |  | 162 |
Other investments |  |  | (124 | ) |  |  | 45 |
Equity method investments |  |  | (6 | ) |  |  | 13 |
Accrued expenses |  |  | 78 |  |  |  | 146 |
Product start-up costs |  |  | 60 |  |  |  | 60 |
Stock-based compensation expense |  |  | 4 |  |  |  | 4 |
Other |  |  | (59 | ) |  |  | (73 | )
Tax Carryovers |  |  |  |  |  |  |  |
Net operating loss carryover |  |  | 1,693 |  |  |  | 1,069 |
Charitable contributions carryover |  |  | 8 |  |  |  | 14 |
Capital loss carryover |  |  | 249 |  |  |  | 231 |
Valuation Allowance |  |  | (2,061 | ) |  |  | (1,667 | )
Net deferred tax liability |  | $ | (133 | ) |  | $ | (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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