Income Taxes

9 Months Ended

Mar. 31, 2019

Components of Benefit for Income Taxes

The domestic and foreign components of

income (

loss) from continuing operations before the benefit (provision) for income taxes are as follows:

	Three Months Ended March 31,						Nine Months Ended March 31,
	2019			2018			2019			2018

United States	$	1,368		$	(6,331	)	$	(57	)	$	(11,285	)
Foreign		(42	)		5,261			(148	)		5,079
‘ Income (loss) from continuing operations	$	1,326		$	(1,070	)	$	(205	)	$	(6,206	)

The components of the benefit for income taxes are as follows:

	Three Months Ended March 31,						Nine Months Ended March 31,
	2019			2018			2019			2018

United States	$	(75	)	$	(222	)	$	(73	)	$	(1,140	)
Foreign		-			-			-			-
Benefit for income taxes	$	(75	)	$	(222	)	$	(73	)	$	(1,140	)

On December 22, 2017, President Donald J. Trump signed the Tax Cuts and Jobs Act

(the “

TCJA”) that instituted fundamental changes to the taxation of U.S. corporations. Among the many changes instituted by the TCJA, the following have already impacted or are likely to impact our business in the future: permanent reduction in the U.S. federal statutory tax rate for corporations from 35% to 21%; new restrictions on the deductibility of net operating losses

(“NOLs”)

generated in years beginning after December 22, 2017; additional limitations on certain business deductions such as interest expense and entertainment expenses; the creation of new regimes designed to tax the income of controlled foreign corporations (global intangible low-taxed income, or “GILTI”, and a base-erosion anti-abuse tax, or “BEAT”); and a possible new deduction for U.S. corporations on their foreign earnings (foreign-derived intangible income, or “FDII”); and

the imposition of

a one-time repatriation tax on deemed repatriated earnings and profits of U.S.-owned foreign subsidiaries. In conjunction with the TCJA, on December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act

(“

SAB 118

”),

which provides guidance on accounting for the tax effects of the TCJA. SAB 118 allows for recording certain effects of the TCJA as “provisional” during a one-year measurement period, which for us ended in the second quarter of our fiscal year 2019.

We are continuing to evaluate the impact of the TCJA in light of the guidance that the U.S. Treasury and various state taxing authorities are releasing. At this time, we do not believe there will be any material changes to the amounts previously provided for the impact of the TCJA.

As a result of the TCJA, we are reassessing our intentions related to our indefinite reinvestment assertion as part of our provisional estimates. Should we decide to no longer indefinitely reinvest such foreign earnings outside the

United States,

we would have to adjust the income tax provision in the period such determination is made. We currently have an immaterial amount of cash available for repatriation of less than $20. After the TCJA, there should be no federal income taxes that would be due upon repatriation. Any other impact, such as withholding tax, state taxes, or foreign exchange rate changes, should be immaterial based on the amount of cash held overseas.

NOLs

As of June 30, 2018, we had U.S. federal

NOL

carryforwards of approximately $56,568 for income tax purposes, of which none expire in our fiscal year 2019, and the remainder expire at various dates through our fiscal year 2037. We recently completed an evaluation of the potential effect of Section 382 of the Internal Revenue Code (the “IRC”) on our ability to utilize these

NOLs.

The study concluded that we have not had an ownership change for the period from July 22, 1993 to June 30, 2018; therefore, the NOLs will not be subject to limitation under Section 382. If we experience an ownership change as defined in Section 382 of the IRC, our ability to use these NOLs will be substantially limited, which could therefore significantly impair the value of that asset. We have taken steps to protect the value of our NOLs with a “Tax Asset Preservation Plan” which is described more fully in our Annual Report on Form 10-K for the fiscal year ended June 30, 2018.

As of June 30, 2018, we had state NOLs of $35,379. The state NOLs expire according to the rules of each state and expiration will occur between fiscal year 2019 and fiscal year 2037.

Deferred Tax Assets and Related Valuation Allowances

In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. In determining whether or not a valuation allowance for tax assets is needed, we evaluate all available evidence, both positive and negative, including: trends in operating income or losses; currently available information about future years; future reversals of existing taxable temporary differences; future taxable income exclusive of reversing temporary differences and carryforwards; taxable income in prior carryback years if carryback is permitted under the tax law; and tax planning strategies that would accelerate taxable amounts to utilize expiring carryforwards, change the character of taxable and deductible amounts from ordinary income or loss to capital gain or loss, or switch from tax-exempt to taxable investments. 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. As of March 31, 2019, we maintained a full valuation allowance on our net deferred tax assets in all jurisdictions, with the exception of the $475 alternative minimum tax credit carryforward that is now considered refundable in post-fiscal year 2019 after the enactment of the TCJA. We reclassified $475 of additional alternative minimum tax credit to an income tax receivable account at March 31, 2019 based on our ability to claim a refund of 50% of the alternative minimum tax credit with the filing of our fiscal year 2019 return within the next 12 months. We do not have sufficient evidence of future income to conclude that it is more likely than not that the Company will realize its entire deferred tax inventory in any of its jurisdictions (United States, Germany, and Australia). Therefore, we have recognized a full valuation allowance on the Company’s deferred tax inventory, other than the alternative minimum tax credit. We reevaluate our conclusions regarding the valuation allowance

quarterly

and will make appropriate adjustments as necessary in the period in which significant changes occur.

Research and Development Tax Credits

During our fiscal year ended June 30, 2017, we applied for both a U.S. federal and state of Georgia research and development tax credit in the amounts of $719 and $675, respectively, for our fiscal year ended June 30, 2016. For U.S. federal tax purposes, the credit cannot be utilized immediately, but will carryforward for a period of 20 years. As we do not expect to be able to realize the benefit of the U.S. federal tax credit carryforward before its expiration, we maintain a full valuation allowance on this item. For the state of Georgia tax credit, we have recorded the credit within both other current assets and other long-term assets, net with an offset in both accrued expenses and other long-term liabilities in our consolidated balance sheets as of March 31, 2019 and June 30, 2018. As future payroll tax withholdings of our Georgia-based employees become due, we are able to offset the withholding amount dollar-for-dollar against the credit. As a result, as the credit is claimed, we will (i) reduce other current assets and

other long-term assets, net and

offset the payroll tax liability and (ii) reduce accrued expenses

and other long-term liabilities

and recognize a reduction of operating expenses.

During the three months and nine months ended March 31, 2019, we received $8 and $581, respectively, of proceeds from prior utilization of our state tax credits. As of March 31, 2019, we had $94 remaining

research and development

tax credits available for future use.

Unrecognized Tax Benefits

We have evaluated our unrecognized tax benefits and determined that there has not been a material change in the amount of such benefits for the three months and nine months ended March 31, 2019.