Note 11 - Income Taxes

12 Months Ended

Jun. 30, 2014

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

11. Income Taxes

The components of income from continuing operations before income taxes are as follows:

	Years ended
	June 30, 2014		June 30, 2013
Domestic	$	6,132,000	$	3,671,000
Foreign		1,202,000		532,000
Total	$	7,334,000	$	4,203,000

The components of the income tax provision (benefit) are as follows:

	Years ended
	June 30, 2014			June 30, 2013
Federal tax	$	(809,000	)	$	1,447,000
State tax		(914,000	)		244,000
Total	$	(1,723,000	)	$	1,691,000

	Years ended
	June 30, 2014			June 30, 2013
Current	$	1,742,000		$	354,000
Deferred		(3,465,000	)		1,337,000
Total	$	(1,723,000	)	$	1,691,000

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	Years ended
	June 30, 2014			June 30, 2013
Deferred tax assets:
Net operating loss carryforwards	$	14,681,000		$	16,126,000
Capital loss carryforwards		1,674,000			1,674,000
Accrued expenses		193,000			185,000
Expenses not currently deductible		100,000			154,000
Excess of book over tax depreciation		642,000			49,000
Excess of book over tax amortization		899,000			602,000
Deferred revenue		—			2,000
Other asset		3,000			—
Foreign tax benefit		82,000			82,000
Total deferred tax assets		18,274,000			18,874,000
Deferred tax liabilities:
Intangible assets		2,194,000			2,333,000
Excess of tax over book depreciation		185,000			—
Other liabilities		15,000			21,000
Total deferred tax liabilities		2,394,000			2,354,000
Deferred tax assets, net of liabilities	$	15,880,000		$	16,520,000
Valuation allowance		(11,029,000	)		(15,134,000	)
Net deferred tax asset	$	4,851,000		$	1,386,000

The Company’s provision for income taxes resulted in effective tax rates attributable to loss from continuing operations that varied from the statutory federal income tax rate of 34%, as summarized in the table below.

	Years ended
	June 30, 2014			June 30, 2013
Expected federal income tax expense from continuing operations at 34%	$	2,494,000		$	1,429,000
Expenses not deductible for income tax purposes		239,000			159,000
Amendment of prior year return		(66,000	)		(67,000	)
Taxable income from divestiture of foreign subsidiaries		—			260,000
State income taxes, net of federal benefit		238,000			161,000
Current year utilization of deferred tax asset		(462,000	)		—
Difference in conversion rate		(61,000	)		—
Change in valuation allowance for deferred tax assets		(4,105,000	)		(251,000	)
Income tax (benefit) expense	$	(1,723,000	)	$	1,691,000

As of June 30, 2014, the Company had U.S. federal net operating loss carryforwards available to reduce future taxable income of approximately $30.3 million; however, $23.3 million of these carryforwards were not recognized because they are subject to annual limitations under Internal Revenue Code Section 382 and are expected to expire before being utilized. For tax year June 30, 2014, it is projected that approximately $2.4 million of net operating loss carryforwards will be utilized to offset taxable income. The remaining $4.6 million will be carried forward and will begin to expire in 2019.

In addition, as of June 30, 2014, the Company had foreign net operating loss carryforwards of approximately $14.8 million available to reduce future taxable income; however, approximately $4.0 million of these loss carryforwards is expected to expire by December 31, 2014 and the balance will expire between 2028 and 2031.

The United States entities maintain a valuation allowance of $9.7 million due to expiration of net operating losses carryforward prior to utilization, capital losses and a portion of state net operating loss carryforwards. The valuation allowances are evaluated quarterly to determine the appropriate allowance amount.

Rand Worldwide’s Canadian subsidiary, Rand A Technology Corporation, underwent an audit by the Canadian Revenue Authority for tax years 2005 through 2009. The audit has been concluded and adjustments resulting from the audit were not material to the financial statements.