Income Taxes

12 Months Ended

Jun. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The income tax expense for the fiscal years ended June 30, 2021, 2020 and 2019 consists of the following (in thousands):

	Year ended June 30,
	2021		2020		2019
Income Before Income Taxes:
Domestic	$	15,233	$	12,817	$	6,596
International	1,999		1,844		2,634
	$	17,232	$	14,661	$	9,230
Current Taxes:
Federal	$	2,146	$	1,297	$	222
State	510		332		176
Foreign	730		1,113		833
Total Current Income Tax Provision	$	3,386	$	2,742	$	1,231
Deferred Taxes:
Federal	$	897	$	316	$	502
State	197		71		109
Foreign	(142)		(17)		(41)
Total Deferred Income Tax Provision	$	952	$	370	$	570
Net Income Tax Provision	$	4,338	$	3,112	$	1,801

The effective income tax rate for the fiscal years ended June 30, 2021, 2020 and 2019 differs from the U.S. Federal statutory income tax rate due to the following:

	Year ended June 30,
	2021		2020		2019
Federal statutory income tax rate	21.0	%	21.0	%	21.0	%
State income taxes, net of federal benefit	3.6	%	3.8	%	3.1	%
Foreign tax rate difference	2.1	%	1.4	%	4.5	%
Tax return to provision true-up	(0.7)	%	0.0	%	(1.1)	%
Limit on future stock compensation due to 162(m)	1.7	%	2.3	%	2.6	%
Foreign withholding tax	0.4	%	3.3	%	0.0	%
Other differences	1.5	%	1.9	%	(0.1)	%
Revalue of deferred for change in federal tax rate	0.1	%	(0.1)	%	(0.6)	%
Permanent differences:
— stock based compensation	(2.3)	%	(13.6)	%	(7.7)	%
— current year section 162(m) limitation	0.0	%	1.6	%	0.0	%
— foreign derived intangible income deduction	(0.6)	%	(0.5)	%	(0.1)	%
— tax credits	(1.4)	%	(2.3)	%	(3.7)	%
— meals and entertainment	0.1	%	0.4	%	0.7	%
— other permanent differences	0.9	%	1.8	%	1.7	%
Change in valuation allowance	(1.2)	%	0.2	%	(0.8)	%
Net income tax provision	25.2	%	21.2	%	19.5	%

The components of the deferred tax assets and liabilities as of June 30, 2021 and 2020 are as follows (in thousands):

	June 30,
	2021		2020
Deferred tax assets:
Federal, state, and foreign net operating loss carryovers	$	271	$	501
Stock option compensation	444		824
Accrued vacation, allowance for returns, bonuses & other	2,104		2,067
Gross deferred tax asset	$	2,819	$	3,392
Deferred tax liabilities:
Patents and trademarks	$	(99)	$	(117)
Property & equipment	(1,250)		(801)
Other	(189)		(59)
Gross deferred tax liabilities	(1,538)		(977)
Less: valuation allowance	(73)		(251)
Deferred tax assets, net	$	1,208	$	2,164

The Company has adopted accounting guidance for uncertain tax positions which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position. The measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition of the benefit. Currently, the Company has no material uncertain tax positions and does not expect significant changes within the next twelve months. Accordingly, the Company has not reserved for any corresponding interest or penalties.

In fiscal 2020, the Company recorded an uncertain tax position related to withholding taxes in Taiwan. During fiscal 2021, the Company applied for and received approval for a reduced withholding rate. The Company has not yet made the withholding payments but has accrued for the liability as of the balance sheet date. The Company will make the required payments in the beginning of fiscal 2022.

The beginning balance, ending balance, and changes to the liability for uncertain tax positions for the fiscal years ending June 30, 2021 and 2020 are as follows (in thousands):

	June 30,
	2021		2020
Unrecognized tax benefits, beginning of period	$	480	$	—
Gross increases - tax positions in prior period	—		—
Gross decreases - tax positions in prior period	(480)		—
Gross increases - tax positions in current period	—		480
Settlement	—		—
Lapse of statute of limitations	—		—
Currency adjustment	—		—
Unrecognized tax benefits, end of period	$	—	$	480

The tax years open for examination by the Internal Revenue Service (“IRS”) include returns for fiscal years June 30, 2018 through present and the open tax years by state tax authorities include returns for fiscal years June 30, 2017 through present. In addition, the IRS and state tax authorities may examine NOLs for any previous years if utilized by the Company.

As of June 30, 2021, the Company had utilized all of its Federal net operating loss (“NOL”) carry-forwards. The net operating losses were to expire by June 30, 2024 and are subject to review by the Internal Revenue Service, and are subject to U.S. Internal Revenue Code Section 382 limitations. As of June 30, 2021, state NOLs were $6.7 million and foreign NOLs were $0.1 million.

The total recognized tax benefit from settlement of stock based awards for the fiscal years ending June 30, 2021 and 2020, was $8,000 and $2.0 million, respectively.

The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years of June 30, 2017 through June 30, 2021.