Income Taxes

12 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

(11) Income Taxes

The Company accounts for income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts. Valuation allowances are established, when necessary, to reduce deferred tax assets to amounts that are more likely than not to be realized. As of June 30, 2021 and 2020, the Company had established a full valuation allowance against all of its net deferred tax assets.

For the fiscal year ended June 30, 2021, the Company incurred losses from operations in the amount of $7.6 million. There is no effective tax rate for the fiscal year 2021. There is no current state tax expense.

FASB ASC 740, Income Taxes addresses the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken or expected to be taken on a tax return. The Company had unrecognized tax benefit of $329 thousand as of June 30, 2021, all of which have been accounted for as contra deferred tax assets.

For the years ended June 30, 2021 and 2020, the Company’s effective tax rate differed from the federal statutory rate of 21%, primarily due to prior year deferred true ups and the valuation allowance against its net deferred tax assets.

Loss carryovers are generally subject to modification by tax authorities until three years after they have been utilized.

Income Tax Expense and Effective Tax Rate

The components of income tax benefit from operations are as follows:

	Year Ended June 30,
(In thousands)	2021		2020
Current
Federal	$	—	$	—
State and local		—		—
Total current tax benefit	$	—	$	—
Deferred
Federal		—		—
State and local		—		—
Total deferred tax benefit	$	—	$	—
Total tax benefit	$	—	$	—

A reconciliation of the reported income tax benefit to the amount that would result by applying the U.S. Federal statutory rate to the loss before income taxes to the actual amount of income tax benefit recognized follows:

	Year Ended June 30,
(In thousands)	2021			2020
Expected benefit	$	1,596		$	1,746
State tax expense		—			—
Tax credits		187			—
Change in valuation allowance		(1,352	)		2,961
Prior year true-up		26			(4,650	)
Expiration of net operating loss carryovers		(533	)		—
Other permanent items		76			(57	)
Total income tax benefit	$	—		$	—

Deferred Tax Assets and Liabilities

The Company’s deferred tax assets as of June 30, 2021 and 2020 consist of the following:

	Year Ended June 30,
(In thousands)	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	15,882		$	14,786
Tax credit carryforwards		1,165			—
Lease liability - current and non-current		62			202
Accrued expenses and other timing		741			1,047
Property and equipment, principally due to differences in depreciation		77			85
Total gross deferred tax assets	$	17,927		$	16,120
Less — valuation allowance		(17,875	)		(15,941	)
Net deferred tax assets	$	52		$	179
Deferred tax liabilities:
Right-of-use assets	$	(52	)	$	(179	)
Total gross deferred tax liabilities		(52	)		(179	)
Net deferred tax assets	$	—		$	—

The Company files consolidated returns for federal, Florida, and Texas income and franchise taxes. In assessing the need for a valuation allowance, management considers whether it is more likely than not that some portion or all of the net deferred tax assets will be utilized to offset future tax liabilities. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. As of June 30, 2021, the Company provided a full valuation allowance of approximately $17.9 million against its net deferred tax assets.

The valuation allowance increased by approximately $2.0 million for the year ended June 30, 2021. Since the Company reflects a full valuation allowance against its deferred tax assets, there has been no income tax impact from these changes. The Tax Cuts and Jobs Act enacted on December 22, 2017 repealed the alternative minimum tax and any available alternative minimum tax credit will be refunded according to the guidelines of the Tax Cuts and Jobs Act. The alternative minimum tax credit is limited to 50% of the available balance each year for tax years 2018 to 2020 and any remaining balance is fully refundable for tax year 2021. The CARES Act enacted on March 27, 2020 included the acceleration of the alternative minimum tax credit and allows for the acceleration of the refundable AMT credit up to 100% of the AMT credit. As a result, the Company received a $429 thousand alternative minimum tax credit refund in the June 2021 tax year.  The Company has no further alternative minimum tax refund receivable as of June 30, 2021.

At June 30, 2021, the Company had net operating loss carryforwards of approximately $74.0 million with approximately $38.6 million ($8.1 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income set to expire between the years of 2020 and 2037. The Company also had net operating loss carryforwards with indefinite lives of approximately $35.4 million ($7.4 million, tax effected) for federal income tax purposes that are available to offset future regular taxable income. For net operating losses with indefinite carryforward lives, generated beginning after December 31, 2017, the Tax Cuts and Jobs Act limits the amount of net operating losses to be utilized and deducted by the taxpayer to 80% of the taxpayer’s taxable income. Utilization of some of these net operating losses is limited due to the changes in stock ownership of the Company associated with the October 2007 Exchange Offer; as such, the benefit from these losses may not be realized.

The Company has federal research and development income tax credit carryovers of $0.8 million as of June 30, 2021.  These credits will expire between the years 2035 and 2041.

At June 30, 2021, the Company also has accumulated state net operating loss carryforwards of approximately $7.4 million ($0.3 million, tax effected) that are available to offset future state taxable income. These net operating loss carryforwards expire between the years 2026 and 2038. These losses may also be subject to utilization limitations; as such, the benefit from these losses may not be realized.

The Company has a temporary credit for business loss carryovers that may be utilized to offset its Texas margin tax. At June 30, 2021, the credit amount is $0.5 million ($0.4 million, tax effected). These credits may be used to offset $13 thousand of state tax liability each year and will expire in 2027.

Uncertain Tax Positions

The Company had unrecognized tax benefits of $329 thousand as of June 30, 2021, all of which have been accounted for as contra deferred tax assets.  A rollforward of the beginning and ending amount of unrecognized tax benefits from July 1, 2020 to June 30, 2021 is as follows:

.

	Year Ended June 30,
(In thousands)	2021		2020
Balance at July 1, 2020	$	—	$	—
Additions for tax positions of current period		80		—
Additions for tax positions of prior years		249		—
Decreases for tax positions of prior years		—		—
Balance at June 30, 2021	$	329	$	—

The Company recognizes interest and penalties related to income tax matters in income tax expense, as incurred. For the years ended June 30, 2021 and 2020, the Company did not recognize any interest expense for uncertain tax positions.