INCOME TAXES

12 Months Ended

Jun. 30, 2014

Notes to Financial Statements

INCOME TAXES (IN THOUSANDS, EXCEPT EARNINGS PER SHARE AND NUMBER OF SHARES)

On a consolidated basis, the Company’s net income tax provisions (benefits) were as follows:

	For the Year Ended June 30,
	2014			2013
Current:
Federal	$	-		$	-
State		5			2
Foreign		(175	)		(956	)
	$	(170	)	$	(954	)
Deferred:
Federal	$	-		$	-
State		-			-
Foreign		(174	)		694
		(174	)		694
Total provision	$	(344	)	$	(260	)

The reconciliation between the U.S. federal tax rate and the effective income tax rate was as follows:

	Year Ended June 30,
	2014			2013
Statutory federal tax rate		(34	)%		(34	)%
State taxes, net of federal benefit		(6	)		(6	)
Foreign tax related to profits making subsidiaries		(400	)		(1	)
NOL Expiration		5			0
Other		5			5
Changes in valuation allowance		95			0
Effective rate		(335	)%		(41	)%

At June 30, 2014, the Company had net operating loss carry forwards of approximately $459 and $931 for federal and state tax purposes, respectively, expiring through 2023. The Company also had tax credit carry forwards of approximately $834 for federal income tax purposes expiring through 2032. Management of the Company is uncertain whether it is more likely than not that these future benefits will be realized. Accordingly, a full valuation allowance has been established.

The components of deferred income tax assets (liabilities) were as follows:

	For the Year Ended June 30,
	2014		2013
Deferred tax assets:
Net operating losses and credits	$	1,572	$	956
Inventory valuation		99		99
Depreciation		-		-
Provision for bad debts		788		3
Accrued vacation		15		16
Capital loss		78		-
Accrued expenses		217		135
Investment in subsidiaries		182		-
Deferred Income		201		-
Other		112		3
Total deferred tax assets	$	3,264	$	1,212

Deferred tax liabilities:
Accrued expenses		(10	)		-
Depreciation		(192	)		(191	)
Other		-			-
Total deferred income tax liabilities	$	(202	)	$	(191	)
Subtotal		3,062			1,019
Valuation allowance		(2,876	)		(1,007	)
Net deferred tax assets	$	186		$	12
Presented as follows in the balance sheets:
Deferred tax assets		388			203
Deferred tax liabilities		(202	)		(191	)
Net deferred tax assets	$	186		$	12

The valuation allowance was increased by $1,869 in fiscal year 2014 and decreased by $134 in fiscal year years 2014 and 2013, respectively.

For U.S. income tax purposes no provision has been made for U.S. taxes on undistributed earnings amounting to $1,152 and $1,026 as at June 30, 2014 and 2013, respectively, of overseas subsidiaries with which the Company intends to continue to reinvest. It is not practicable to estimate the amount of additional tax that might be payable on the foreign earnings if they were remitted as dividends or lent to the Company, or if the Company should sell its stock in the subsidiary.  However, the Company believes that the existing U.S. foreign tax credits and net operating losses available would substantially eliminate any additional tax effects.