Income Taxes

12 Months Ended

Jun. 30, 2015

Income Tax Disclosure [Abstract]

Income Taxes

6.           Income Taxes

The provision for (benefit from) income taxes from continuing operations consists of the following amounts (in thousands): 

	Years Ended June 30,
	2015			2014
Current:
Federal	$	—		$	—
State		(44	)		3
Deferred:
Federal		—			(84	)
State		—			(23	)
Benefit from income taxes	$	(44	)	$	(104	)

The effective income tax rate on loss from continuing operations differs from the United States statutory income tax rates for the reasons set forth in the table below (in thousands, except percentages). 

	Years Ended June 30,
	2015						2014
	Amount			Percent Pretax Income			Amount			Percent Pretax Income
Loss from continuing operations before income taxes	$	(446	)		100	%	$	(755	)		100	%
Computed “expected” income tax benefit on loss from continuing operations before income taxes	$	152			34	%	$	257			34	%
State tax, net of federal benefit		30			7	%		(10	)		(1	%)
Tax incentives		88			20	%		30			4	%
Change in valuation allowance		(227	)		(51	%)		(154	)		(21	%)
Permanent differences		—			—			(31	)		(4	%)
State income tax rate adjustment		—			—			12			2	%
Other		1			—			—			—
Income tax benefit	$	44			10	%	$	104			14	%

The total income tax expense recorded for the years ended June 30, 2015 and 2014 was as follows (in thousands): 

	June 30,
	2015			2014
Tax benefit from continuing operations	$	(44	)	$	(104	)
Tax expense from discontinued operations		—			107
	$	(44	)	$	3

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at June 30, 2015 and 2014 are as follows (in thousands): 

	June 30,
	2015			2014
Deferred tax assets/(liabilities) – current:
Accrued expenses	$	385		$	253
Inventory		457			486
Other		6			—
Net operating losses		—			119
State taxes		(3	)		1
Less: valuation allowance		(775	)		(744	)
Net deferred tax assets	$	70		$	115

	June 30,
	2015			2014
Deferred tax assets/(liabilities) – non-current:
Income tax credit carry forwards	$	1,562		$	1,443
Net operating losses		1,592			1,299
Intangible assets		251			287
Deferred rent		—			132
Other		28			—
State taxes		22			16
Property and equipment, principally due to differing depreciation methods		(316	)		(458	)
Goodwill		(4	)		—
Federal impact of state taxes		(20	)		—
Share based compensation		—			16
Unrealized gain on investment		—			(85	)
Total gross deferred tax assets		3,115			2,650
Less: valuation allowance		(3,185	)		(2,765	)
Net deferred tax liabilities	$	(70	)	$	(115	)

We have federal net operating loss carry forwards at June 30, 2015 and 2014 in the amount of $2,983,000 and $2,556,000, respectively, which begin to expire in 2034. Fiscal 2015 federal net operating losses include $17,000 of losses which have been created from excess stock compensation deductions. State net operating loss carry forwards at June 30, 2015 and 2014 amount to $6,543,000 and $6,339,000, respectively, and begin to expire in 2025. Federal tax credit carry forwards at June 30, 2015 and 2014 amount to $1,072,000 and $884,000, respectively, and begin to expire in 2026. State tax credit carry forwards at June 30, 2015 and 2014 amount to $773,000 and $559,000, respectively, the majority of which do not expire.

Significant management judgment is required in determining our provision for income taxes and the recoverability of our deferred tax asset. Such determination is based primarily on our historical taxable income, with some consideration given to our estimates of future taxable income by jurisdictions in which we operate and the period over which our deferred tax assets will be recoverable. Due to cumulative taxable losses in recent years, we have maintained a full valuation allowance against our deferred tax assets at June 30, 2015 and 2014, information related to which is as follows (in thousands):

	Valuation Allowance
Balance at July 1, 2014	$	(3,509	)
Increase in deferred tax asset valuation allowance		(451	)
Balance at June 30, 2015	$	(3,960	)

As of June 30, 2015, we have accrued $399,000 of unrecognized tax benefits related to federal and state income tax matters that would reduce the Company’s income tax expense if recognized. However, since we currently have a full valuation allowance against our deferred tax assets the timing of the favorable effective tax rate impact will be delayed until such time, if ever, that the valuation allowance is eliminated.

Information with respect to our accrual for unrecognized tax benefits is as follows (in thousands):

	June 30,
	2015		2014
Unrecognized tax benefits:
Beginning balance	$	363	$	347
Additions based on federal tax positions related to the current year		8		21
Additions based upon state tax positions related to the current year		15		—
Additions for tax positions of prior years		13		—
Reductions for tax positions of prior years		—		(5	)
Ending balance	$	399	$	363

Although it is reasonably possible that certain unrecognized tax benefits may increase or decrease within the next twelve months due to tax examinations, settlement activities, expirations of statute of limitations, or the impact on recognition and measurement considerations related to the results of published tax cases or other similar activities, we do not anticipate any significant changes to unrecognized tax benefits over the next twelve months.

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense when applicable. As of June 30, 2015, no interest or penalties applicable to our unrecognized tax benefits have been accrued since we have sufficient tax attributes available to fully offset any potential assessment of additional tax.

We are subject to U.S. federal income tax, as well as income tax of multiple state tax jurisdictions. We are currently open to audit under the statute of limitations by the Internal Revenue Service for the years ended June 30, 2012 and later. Our state income tax returns are open to audit under the statute of limitations for the years ended June 30, 2011 and later.