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Overview of Business and Basis of Presentation (Policies)
6 Months Ended
Dec. 31, 2013
Overview of Business and Basis of Presentation [Abstract]  
Use of Estimates
Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.
Income Taxes
Income Taxes

As of June 30, 2013, we had U.S. Federal net operating loss carryforwards of approximately $97,200,000 for income tax purposes which will expire at various dates through 2032.  We completed an evaluation of the potential effect of Section 382 of the Internal Revenue Code of 1986 (the “Code”) on our ability to utilize these net operating losses.  The study concluded that we have not had an ownership change for the period from July 22, 1993 to June 30, 2013.  Therefore, we do not expect the U.S. Federal net operating losses to be subject to limitation under Section 382, unless there are additional material ownership changes in the future.

Realization of our deferred tax assets is dependent primarily on the generation of future taxable income. In considering the need for a valuation allowance we consider our historical, as well as, future projected operations along with other positive and negative evidence in assessing if sufficient future taxable income will be generated to use the existing deferred tax assets.  The following summarizes our conclusions on the need for a valuation allowance in each jurisdiction as of December 31, 2013:

U.S.:  As of December 31, 2013, we have realized a three-year cumulative accounting profit in the U.S. While the negative evidence of cumulative losses in recent years is not present at December 31, 2013, we believe that significant uncertainty continues to exist in our domestic operations as our recent improved financial performance in the U.S. has been for a limited time period.  We also considered the fact that the three-year cumulative accounting profit included sales to a long time customer that we recently lost and a non-recurring gain from the sale of certain patents.  We believe that our history of expired net operating losses, our inability to carryback any net operating losses or credits, a history of inconsistent earnings, and the absence of currently available tax strategies do not provide support for our ability to realize our deferred tax assets at the present time.   We believe that it is more likely than not that the benefit from our domestic deferred tax assets will not be realized.  In recognition of this risk, we have provided a full valuation allowance on the deferred tax assets relating to our domestic operations as of December 31, 2013.
 
The amount of the deferred tax assets considered realizable, however, could be adjusted if estimates of future taxable income are increased or if a more sustained profitability is achieved and additional weight may be given to subjective evidence such as our projections for growth.  If the positive and negative evidence being evaluated changes and we determine we will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets as of December 31, 2013 will be recognized as a reduction in income tax expense.

United Kingdom (“U.K.”):  During the first half of our fiscal year 2014, a change in U.K. tax law relative to treatment of research and development expenses allowed us to release $173,000 of valuation allowances against deferred tax assets that we believe are now realizable as a result of the current period tax law change.  We believe that in light of this law change, we will now generate sufficient taxable income to fully utilize our net deferred tax assets in the U.K.

Japan:  Japan has a long history of profitable operations, and we continue to project profitability in Japan for the foreseeable future.  Therefore, we continue to believe that we will fully realize the net deferred tax assets in Japan, and no valuation allowance is needed.

Other Foreign Jurisdictions:  We also evaluated the need for a continued full valuation allowance against our foreign deferred tax assets in other jurisdictions.  We concluded that a full valuation allowance against our deferred tax assets for other foreign jurisdictions was warranted due to, among other reasons, (i) the realized cumulative accounting losses, (ii) our long history of taxable losses, and (iii) our uncertainty with respect to generating future taxable income in the near term given our recently completed projections and other inherent uncertainties in our business.

Each quarter, we assess the total weight of positive and negative evidence and evaluate whether release of all or any portion of the valuation allowance is appropriate. Should we come to the conclusion that a release of our valuation allowances is required, there would be a significant increase in net income and earnings per share due to the impact on the tax rate.

We recorded an income tax benefit of ($19,000) and an income tax provision of $20,000 during the three and six months ended December 31, 2013, respectively.  Our taxable income is primarily due to taxable income earned by our Japan subsidiary and an expected alternative minimum tax liability in the U.S., both of which were either more than offset or mostly offset by the aforementioned release of valuation allowances against deferred tax assets in the U.K.  We recorded $6,000 and $113,000 of income tax provision during the three and six months ended December 31, 2012, respectively, primarily due to taxable income earned by our Japan subsidiary.
Recently Issued Accounting Pronouncements
Recently Issued Accounting Pronouncements

Adopted

In February 2013, the FASB issued ASU No. 2013-2, Comprehensive Income: Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, providing on disclosure requirements for items reclassified out of accumulated other comprehensive income (“AOCI”).  This new guidance requires entities to present (either on the face of the income statement or in the notes) the effects on the line items of the income statement for amounts reclassified out of AOCI. The new guidance was effective for us beginning July 1, 2013 and did not have a material impact on our financial statements.
To Be Adopted
In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters (Topic 830) which provides guidance on a parent’s accounting for the cumulative translation adjustment upon derecognition of a subsidiary or group of assets within a foreign entity. This new guidance requires that the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The new guidance will be effective for us beginning July 1, 2014. We do not anticipate any material impact on our financial statements upon adoption.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This amendment requires entities to present an unrecognized tax benefit, or a portion of an unrecognized tax benefit, as a reduction to a deferred tax asset for a net operating loss carryforward or a similar tax loss or a tax credit carryforward, unless certain conditions exist. This guidance is effective prospectively for annual reporting periods (and the interim periods within) beginning after December 15, 2013. Early adoption and retrospective application are permitted. We will adopt this guidance effective July 1, 2014.  We expect adoption will not have a material impact on our financial condition, results of operations, or cash flows.