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INCOME TAXES | 12 Months Ended
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Jun. 30, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | Income before provision for income taxes consists of the following:
|  | For the Year Ended June 30, |
|  | 2019 |  |  | 2018 |
United States |  |  | (308 | ) |  |  | (180 | )
International |  |  | 1,717 |  |  |  | 2,470 |
Total |  | $ | 1,409 |  |  | $ | 2,290 |
The components of the provision for income taxes are as follows:
|  | For the Year Ended June 30, |
|  | 2019 |  |  | 2018 |
Current: |  |  |  |  |  |
Federal |  | $ | (337 | ) |  | $ | 900 |
State |  |  | 2 |  |  |  | 2 |
Foreign |  |  | 289 |  |  |  | 79 |
|  | $ | (46 | ) |  | $ | 981 |
Deferred: |  |  |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | - |
State |  |  | - |  |  |  | - |
Foreign |  |  | 4 |  |  |  | 6 |
|  |  | 4 |  |  |  | 6 |
Total provisions |  | $ | (42 | ) |  | $ | 987 |
A reconciliation of income tax expense compared to the amount of income tax expense that would result by applying the U.S. federal statutory income tax rate to pre-tax income is as follows:
|  | For the Year Ended June 30, |
|  | 2019 |  |  | 2018 |
Statutory federal tax rate |  |  | 21.00 | % |  |  | (27.55 | )%
State taxes, net of federal benefit |  |  | (0.22 | ) |  |  | (6.00 | )
Permanent items and credits |  |  | 11.23 |  |  |  | - |
Foreign rate differential |  |  | (4.76 | ) |  |  | 32.98 |
Other |  |  | 4.71 |  |  |  | (1.45 | )
Changes in valuation allowance |  |  | (11.11 | ) |  |  | 4.01 |
Tax reform related to one-time repatriation tax |  |  | (23.83 | ) |  |  | (45.0 | )
Effective rate |  |  | (2.98 | )% |  |  | (43.10 | )%
The provision for income taxes has been determined based upon the tax laws and rates in the countries in which we operate. The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017, and permanently reduces the U.S. federal corporate tax rate from 35% to 21%, eliminated corporate Alternative Minimum Tax, modified rules for expensing capital investment, and limits the deduction of interest expense for certain companies. The Act is a fundamental change to the taxation of multinational companies, including a shift from a system of worldwide taxation with some deferral elements to a territorial system, current taxation of certain foreign income, a minimum tax on low tax foreign earnings, and new measures to curtail base erosion and promote U.S. production. As the Company has a June 30 fiscal year end, the lower corporate income tax rate was phased in as of January 1, 2018, resulting in a lower US statutory federal rate. In accordance with Section 15 of the Internal Revenue Code, the Company applied a blended U.S. statutory federal income tax rate of 27.55% in computing the tax provision for the year ended June 30, 2018. Accounting Standard Codification (“ASC”) 740 requires filers to record the effect of tax law changes in the period enacted. The Company recognized income tax expenses of $900,000 related to the one-time deemed repatriation as of June 30, 2018. No expenses were recognized related to the deferred tax re-measurement and minimum tax on low tax foreign earnings. The SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) that permits filers to record provisional amounts during a measurement period ending no later than one year from the date of enactment. As of Dec 31, 2018, the Company’s accounting for the Tax Act is complete. The provision for income taxes for the year ended June 30, 2019 includes a $145 decrease from the completion of our provisional accounting for the effects of the Tax Act under SAB 118. The decrease is associated with the one-time mandatory repatriation tax of certain post-1986 earnings and profits that were deferred from U.S. taxation by the Company’s foreign subsidiaries. The Company filed its US federal income tax return during Q4, which included the $755 one-time repatriation tax as well as utilization of net operating losses and tax credits amounting to $192 which was not finalized until the filing of the return. Due to the enactment of Tax Act, the Company is subject to a tax on global intangible low-taxed income (“GILTI”). GILTI is a tax on foreign income in excess of a deemed return on tangible assets of foreign corporations. Companies subject to GILTI have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for temporary differences including outside basis differences expected to reverse as GILTI. The Company has elected to account for GILTI as a period cost, and therefore has included GILTI expense in its effective tax rate calculation for the year ended June 30, 2019. The Company accrues penalties and interest related to unrecognized tax benefits when necessary as a component of penalties and interest expenses, respectively. The Company had no unrecognized tax benefits or related accrued penalties or interest expenses at June 30, 2019. The Company has maintained an indefinite reinvestment assertion as of June 30, 2019. Accordingly, no deferred taxes related to withholding taxes or unrealized foreign currency gains or losses have been recorded. In assessing the ability to realize the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based on these criteria, management believes it is more likely than not the Company will not realize the benefits of the federal, state, and foreign deductible differences. Accordingly, a full valuation allowance has been established. Temporary differences that give rise to a significant portion of deferred tax assets and deferred tax liabilities is as follows for the year ended June 30:
|  | For the Year Ended June 30, |
|  | 2019 |  |  | 2018 |
Deferred tax assets: |  |  |  |  |  |
Net operating losses and credits |  | $ | 363 |  |  | $ | 633 |
Inventory valuation |  |  | 64 |  |  |  | 69 |
Provision for bad debts |  |  | 296 |  |  |  | 112 |
Accrued vacation |  |  | 94 |  |  |  | 3 |
Accrued expenses |  |  | 325 |  |  |  | 629 |
Fixed asset basis |  |  | 23 |  |  |  | - |
Investment in subsidiaries |  |  | - |  |  |  | 61 |
Unrealized gain |  |  | 55 |  |  |  | 4 |
Other |  |  | 73 |  |  |  | 3 |
Total deferred tax assets |  | $ | 1,293 |  |  | $ | 1,514 |
Deferred tax liabilities: |  |  |  |  |  |
Depreciation |  |  | (390 | ) |  |  | (324 | )
Others |  |  | (78 | ) |  |  | - |
Total deferred income tax liabilities |  | $ | (468 | ) |  | $ | (324 | )
Subtotal |  |  | 825 |  |  |  | 1,190 |
Valuation allowance |  |  | (762 | ) |  |  | (1,117 | )
Net deferred tax assets |  | $ | 63 |  |  | $ | 73 |
Presented as follows in the balance sheets: |  |  |  |  |  |  |  |
Deferred tax assets |  |  | 390 |  |  |  | 400 |
Deferred tax liabilities |  |  | (327 | ) |  |  | (327 | )
Net deferred tax assets |  | $ | 63 |  |  | $ | 73 |
The valuation allowance decreased by $355 and $293 in fiscal year 2019 and 2018, respectively. At June 30, 2019, the Company had no federal net operating loss carry-forwards and state net operating loss carryforward of $867, which expire through 2038. These carryovers may be subject to limitations under I.R.C. Section 382. The Company also had tax credit carry-forward of approximately $49 for U.S. federal income tax purposes expiring through 2020. Management of the Company is uncertain whether it is more likely than not that these future benefits will be realized. Accordingly, a full valuation allowance was established. Generally, U.S. federal, state, and foreign authorities may examine the Company’s tax returns for three years, four years, and five years, respectively, from the date an income tax return is filed. However, the taxing authorities may continue to adjust the Company’s net operating loss carryforwards until the statute of limitations closes on the tax years in which the net operating losses are utilized.

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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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