Income Taxes

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

18.Income Taxes

The Company had loss from continuing operations before provision for income taxes of $15.0 million and $6.8 million for the years ended June 30, 2022 and 2021, respectively. There was no foreign activity during these years.

The provision for income taxes includes the following:

	For the years ended June 30,
(in thousands)	2022			2021
Current	$	106		$	1,608
Deferred	$	(85	)	$	67
Total	$	21		$	1,675

The Company recognized an income tax expense from continuing operations of $0.02 million and $1.7 million for the years ended June 30, 2022 and 2021, respectively. This expense consists solely of state and local income taxes. No federal income taxes were incurred for the years ended June 30, 2022 and 2021.

There were no intraperiod allocations during the year ended June 30, 2022. The Company recognized an income tax benefit with respect to discontinued operations of $0.1 million during the year ended June 30, 2021 related to intraperiod allocations.

The following table reconciles the expected corporate federal income tax expense (benefit), computed by multiplying the Company's loss before income taxes by the statutory tax rate of 21% to the total tax expense.

	For the years ended June 30,
(in thousands)	2022			2021
Federal tax benefit at statutory rate	$	(3,153	)	$	(1,437	)
State taxes net of federal impact		(504	)		(289	)
Permanent adjustments		750			32
Change in valuation allowance		(27,527	)		(95,294	)
Provision to return true-up		159			(61	)
Deferred remeasurement		287			(249	)
Net operating loss and credit expirations		30,059			99,071
Stock compensation adjustment		(42	)		(53	)
Other		(8	)		(45	)
Total tax expense	$	21		$	1,675

The tax effect of temporary differences that give rise to significant portions of the Company's deferred tax assets and liabilities are as follows:

	As of June 30,
(in thousands)	2022			2021
Deferred Tax Assets:
Net operating loss carryforwards	$	190,535		$	217,216
Accruals and allowances not deductible for tax purposes		1,646			1,411
Acquired intangibles		13			-
Stock based compensation		603			621
Unrealized loss on investment		5,361			5,326
Lease liability		1,005			1,436
Investment in partnerships		10,464			11,482
Interest expense carryforward		560			-
Total deferred tax assets, gross	$	210,188		$	237,492
Less: valuation allowance	$	(207,085	)	$	(234,612	)
Total deferred tax assets, net	$	3,103		$	2,880
Deferred Tax Liabilities:
Right to use asset	$	(951	)	$	(1,348	)
Acquired intangibles		-			(207	)
Convertible debt discount		(213	)		-
Goodwill		(2,225	)		(1,696	)
Total deferred tax liabilities	$	(3,389	)	$	(3,251	)
Total deferred tax liabilities, net (indefinite-lived assets)	$	(286	)	$	(371	)

In light of the Company's history of cumulative operating losses, the Company recorded a valuation allowance for all of its federal and state deferred tax assets, as it is presently unable to conclude that it is more likely than not that the federal and state deferred tax assets in excess of deferred tax liabilities will be realized. The decrease of $27.6 million in the overall valuation allowance relates primarily to the expiration of federal tax attributes. The state deferred amounts reflected in the above table were calculated using the enacted tax rates. The Company will establish the related federal deferred tax liability for the benefit of the state deduction in conjunction with its analysis of the realizability of its state deferred tax assets. The Company has a net deferred tax liability due to indefinite-lived goodwill that is not amortizable for US GAAP purposes and forecasted future state income due to the reversal of taxable temporary differences in states where the Company has no net operating losses.

As of June 30, 2022, the Company has net operating loss (NOL) carryforwards for federal and state income tax purposes of approximately $821 million and $211 million, respectively. The federal NOL carryforwards generated prior to fiscal year 2018 will expire from 2023 through 2037. The federal NOL carryforwards generated in fiscal year 2018 or later may be carried forward indefinitely. The California NOL carryforwards of will expire from 2029 through 2037. The Massachusetts NOL carryforwards will expire from 2031 to 2038.

The following table reflects federal NOL carryforwards that will expire beginning in the fiscal year ended June 30, 2023 (in thousands):

Fiscal Year of Expiration	Federal NOL carryforwards
2023		131,077
2024		60,132
2025		117,277
2026 through 2037		486,542
Indefinite		26,039
Total	$	821,067

Under Internal Revenue Code Section 382, the utilization of a corporation's NOL carryforwards is limited following a change in ownership (as defined by the Internal Revenue Code) of greater than 50% within a rolling three-year period. If it is determined that prior equity transactions limit the Company's NOL carryforwards, the annual limitation will be determined by multiplying the market value of the Company on the date of the ownership change by the federal long-term tax-exempt rate. Any amount exceeding the annual limitation may be carried forward to future years for the balance of the NOL carryforward period.

During the years ended June 30, 2022 and 2021, the total amount of gross unrecognized tax benefit activity was as follows (in thousands):

Balance as of June 30, 2020	$	44,380
Reductions for tax positions of prior years		(93	)
Lapse of statute of limitations		(8,268	)
Balance as of June 30, 2021		36,019
Addition for tax positions of prior years		509
Reductions for tax positions of prior years		(71	)
Lapse of statute of limitations		(4,127	)
Balance as of June 30, 2022	$	32,330

During the year ended June 30, 2021, the Company’s unrecognized tax benefits decreased by $3.7 million primarily due to the expiration of the Company’s historical research and development credits for which an unrecognized tax benefit had been established.

As of June 30, 2022 and 2021, the Company had approximately $32.3 million and $36.0 million, respectively, of unrecognized tax benefits. The unrecognized tax benefits, if recognized, would impact the effective tax rate by a corresponding amount without considering the impact of the valuation allowance.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits in tax expense on the Company’s consolidated statements of operations. As of June 30, 2022 and 2021, no amount is accrued for interest associated with tax liabilities.

Although timing of the resolution and/or closure on the Company's unrecognized tax benefits is highly uncertain, the Company does not believe it is reasonably possible that the unrecognized tax benefits would materially change in the next 12 months.

The Company files U.S. federal and U.S. state tax returns. Because of NOL carryforwards, substantially all of the Company's tax years, from the 1995 through 2022 fiscal years, remain open to IRS examinations with the exception of the 2010 and 2009 fiscal years for which IRS examinations have been completed. Substantially all of the Company’s tax years, from the 1995 through 2022 fiscal years, remain open to state tax examination.