INCOME TAXES

The Company and its non-Canadian subsidiaries file a consolidated 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. At June 30, 2015, the current deferred tax asset primarily consists of temporary differences in the deductibility of prepaid expenses, accrued liabilities and unrealized gains on trading securities. The long-term deferred tax asset is composed primarily of unrealized losses and other than temporary impairments on available-for-sale securities, differences in tax and book accumulated depreciation and the difference in tax treatment of stock options. The Company has not recognized deferred income taxes on undistributed earnings of USCAN and Galileo since such earnings are considered to be reinvested indefinitely.

For federal income tax purposes at June 30, 2015, the Company has capital loss carryovers of approximately $24,000 expiring in fiscal year 2020. The Company also has charitable contribution carryovers totaling approximately $121,000 with $68,000 expiring in fiscal year 2018, $34,000 expiring in fiscal year 2019, and $19,000 expiring in fiscal year 2020. The Company has federal net operating loss carryovers of $3.0 million expiring in fiscal year 2035. For Canadian income tax purposes, Galileo has cumulative eligible capital carryovers of $287,000 with no expiration and net operating loss carryovers of $85,000, $156,000, and $58,000 expiring in fiscal 2025 , 2027 and 2030, 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.

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, 2015, 2014, and 2013 a valuation allowance of $2,073,000, $35,000, and $27,000, respectively, was included related to net operating loss carryover, other carryovers and book/tax differences in the balance sheet.

The Company's components of income (loss) before tax by jurisdiction is as follows:



	Year Ended June 30,
(dollars in thousands)	2015			2014			2013
United States	$	(3,400	)	$	(1,934	)	$	(234	)
Canada	246			329			55
Total	$	(3,154	)	$	(1,605	)	$	(179	)

The reconciliation of income tax computed for continuing operations at the statutory rates to income tax expense is:



	Year Ended June 30,
(dollars in thousands)	2015			% of Pretax		2014			% of Pretax		2013			% of Pretax
Tax expense (benefit) at statutory rate - continuing operations	$	(1,072	)	34.0	%	$	(421	)	34.0	%	$	24		34.0	%
Valuation allowance	1,857			(58.9	)%	35			(2.8	)%	27			38.0	%
Nondeductible membership dues	23			(0.7	)%	25			(2.0	)%	27			38.0	%
Nondeductible meals and entertainment	15			(0.5	)%	25			(2.0	)%	44			62.0	%
Non-deductible insurance	8			(0.3	)%	8			(0.6	)%	8			11.3	%
Nondeductible gain on business combination	—			—	%	(99		)	8.0	%	—			—	%
Non-taxable dividend income	(25		)	0.8	%	(33		)	2.7	%	(35		)	(49.3	)%
Other	16			(0.5	)%	(57		)	4.5	%	5			7.0	%
Total tax expense (benefit) - continuing operations	$	822		(26.1	)%	$	(517	)	41.8	%	$	100		141.0	%

Components of total tax expense (benefit) are as follows:



	Year Ended June 30,
(dollars in thousands)	2015			2014			2013
Continuing Operations
Current tax expense (benefit) - U.S. Federal	$	(21	)	$	(904	)	$	91
Current tax expense (benefit) - Non-U.S.	36			—			—
Deferred tax expense (benefit) - U.S. Federal	807			387			9
Total tax expense (benefit) - continuing operations	$	822		$	(517	)	$	100

Discontinued Operations
Current tax expense (benefit) - U.S. Federal	—			(125		)	(85		)
Total tax expense (benefit)	$	822		$	(642	)	$	15

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. The Company’s deferred assets and liabilities using the effective statutory tax rate are as follows:



	Year Ended June 30,
(dollars in thousands)	2015			2014
Book/tax differences in the balance sheet
Trading securities	$	289		$	84
Prepaid expenses	(115		)	(142		)
Accumulated depreciation	129			120
Available-for-sale securities	366			(176		)
Accrued expenses	125			108
Stock-based compensation expense	103			103
Tax Carryovers
Net operating loss carryover	1,051			—
Cumulative eligible capital carryover	76			—
Capital loss carryover	8			252
Charitable contributions carryover	41			35
Valuation Allowance	(2,073		)	(35		)
Net deferred tax asset	$	—		$	349