Income Taxes

12 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

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

	June 30,
(in thousands)	2022		2021
United States	$	382	$	10,854
Total	$	382	$	10,854

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

	June 30,
(in thousands)	2022		2021
Federal	$	-	$	-
State		80		(85	)
		80		(85	)
Deferred tax expense (benefit)
Federal		755		475
State		226		376
		981		851
Total provision for income taxes	$	1,061	$	766

Our effective tax rate for the year ended June 30, 2022, differs from the 21% U.S. federal statutory rate primarily due to nondeductible stock compensation, other permanent differences and state taxes.

Our effective tax rate for the year ended June 30, 2021, differs from the 21% U.S. federal statutory rate primarily due to PPP loan forgiveness, stock-based compensation, research and development tax credits, transaction costs and state taxes.

A reconciliation of income tax expense to the federal rate of 21% is as follows:

	June 30,					June 30,
(in thousands)	2022		2021			2022			2021
Income taxes at statutory rate	$	81	$	2,282			21.0	%		21.0	%
State taxes		289		306			75.5	%		2.8	%
Transaction costs		-		494			0.0	%		4.6	%
Stock-based compensation		464		(628	)		121.1	%		-5.8	%
PPP loan forgiveness		-		(1,387	)		0.0	%		-12.8	%
Federal research and development tax credit		-		(343	)		0.0	%		-3.2	%
Other, net		227		42			59.1	%		39.0	%
Total provision for income taxes	$	1,061	$	766			276.7	%		45.6	%

Deferred tax assets and liabilities are summarized as follows:

	June 30,
(in thousands)	2022			2021
Deferred tax assets:
Accruals	$	871		$	376
Captive		559			-
Operating loss carryforwards		12,251			10,809
Inventories		1,673			1,761
Investments		-			3,464
Interest		1,933			-
Stock compensation		1,289			-
Research and development tax credit carry forwards, net of uncertain tax position		3,793			4,104
Other		747			619
Deferred tax assets		23,116			21,133
Deferred tax liabilities:
Property, plant and equipment		(29,126	)		(26,501	)
Prepaid expenses		(626	)		(1,266	)
Intangible assets		(17,537	)		(9,173	)
Investments		(2,830	)		-
Inventories		(1,530	)		-
Change in accounting method		(1,446	)		(945	)
Deferred tax liabilities		(53,095	)		(37,885	)
Valuation allowance		-			-
Deferred tax liability, net	$	(29,979	)	$	(16,752	)

As of June 30, 2022, the Company has a federal R&D tax credit carryforward of $3.5 million, which will begin to expire in July 2038. In addition, the Company has a California R&D tax credit carryforward of $1.9 million, which does not expire.

As of June 30, 2022, the Company had Federal net operating losses of $49.3 million which do not expire but are limited to 80% of taxable income. In addition, the Company has California net operating losses of $26.1 million which will begin to expire in the tax year of 2040 and an immaterial amount for the other states which will begin to expire in 2038.

The Company is subject to taxation in the United States and various states and local jurisdictions. As of June 30, 2022, the Company is subject to examination by the tax authorities for fiscal 2018 through fiscal 2021. As of June 30, 2022, the Company is no longer subject to U.S. federal or state and local examinations by tax authorities for years before fiscal 2018.

A reconciliation of the beginning and ending balances of unrecognized tax benefit is as follows:

	June 30,
(in thousands)	2022		2021
Balance, beginning of period	$	1,834	$	1,784
Tax position taken in prior period:		-
Gross increases		143		-
Gross decreases		-		(200	)
Tax position taken in current period:		-
Gross increases		-		250
Gross decreases		-		-
Lapse of statute of limitations		-		-
Settlements		-		-
Balance, end of period	$	1,977	$	1,834

As of June 30, 2022, the Company had $2.0 million in unrecognized income tax benefits and there were immaterial decreases to the Company’s unrecognized tax benefits during the year. An immaterial amount of unrecognized tax benefits would reduce income tax expense and the effective tax rate, if recognized. The remaining unrecognized tax benefits would offset other deferred tax assets, if recognized. The Company does not anticipate any material decreases to the unrecognized tax benefit during the next 12 months. The Company’s policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense. The Company had no accrued interest or penalty associated with exposures as of June 30, 2022 and June 30, 2021.