INCOME TAXES

12 Months Ended

Jun. 30, 2020

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The components of income tax expense (benefit) are as follows (in thousands):

	Year ended June 30,
	2020		2019		2018
Current:
Federal	$	(122)	$	(123)	$	—
State	35		42		29
Total current	$	(87)	$	(81)	$	29
Deferred:
Federal	$	(1,406)	$	217	$	(8)
State	(89)		34		—
Total deferred	(1,495)		251		(8)
Net income tax expense (benefit)	$	(1,582)	$	170	$	21

The reconciliation of the statutory income tax rate to the Company’s effective income tax rate for the fiscal years ended June 30, 2020, 2019 and 2018 is as follows:

	Year Ended June 30,
	2020		2019		2018
Statutory rate	21.0	%	21.0	%	27.6	%
State income taxes, net	(1.0)	%	22.9	%	(3.7)	%
Impact of 2017 tax reform	—	%	—	%	(107.0)	%
Meals and entertainment	1.6	%	2.7	%	(1.8)	%
Stock-based compensation	0.7	%	16.1	%	22.6	%
Research and development credits	(5.3)	%	7.3	%	22.4	%
Other	(1.5)	%	1.5	%	(2.0)	%
Effective rate before valuation allowance	15.5	%	71.5	%	(41.9)	%
Change in valuation allowance	(247.1)	%	(27.2)	%	38.7	%
Effective tax rate	(231.6)	%	44.3	%	(3.2)	%

The statutory rate for the year ended June 30, 2018 is a blended rate which was calculated based on the Company's fiscal year and the date that the tax rate changes were effective.

The Company has historically recorded a valuation allowance to reduce its deferred tax assets to an amount that is more likely than not to be realized. However, as of the year ended June 30, 2020, the Company released the full amount of the valuation allowance against its deferred tax assets on the basis of the Company's reassessment of the recoverability of its deferred tax assets. The non-cash benefit to income tax expense resulting from the release of the valuation allowance is approximately $1.7 million.

At each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of the year ended June 30, 2020, the Company achieved a cumulative positive amount of pretax income over a period of three years. Given the Company’s average pretax income for the past three years, adjusted for non-recurring items and for modest increases in new and recurring business, the Company expects to generate income before taxes in future periods which will be sufficient to fully utilize all U.S. federal and state net operating loss carryforward balances and available credits.

At June 30, 2020 and 2019, the significant components of deferred tax assets and liabilities are as follows (in thousands):

	June 30,
	2020		2019 (1)
Deferred tax assets relating to:
Stock-based compensation	$	211	$	261
AMT and research and development credits	490		517
Inventory	98		158
Professional fees	175		124
Deferred tax assets related to other items	140		109
Net operating loss carryforwards	1,016		1,067
Total deferred tax assets	2,130		2,236
Deferred tax liabilities related to depreciable and amortizable assets	(836)		(728)
Deferred tax liabilities related to other items	(42)		(63)
Net deferred tax assets before valuation allowance	1,252		1,445
Valuation allowance	—		(1,688)
Net deferred tax (liability) asset	$	1,252	$	(243)

(1) Certain prior year amounts have been reclassified to conform to current year presentation.

At June 30, 2020, the Company had net operating loss carryforwards of $4.8 million, which will expire, if unused, between June 30, 2032 and June 30, 2038. At June 30, 2020, the Company had various tax credit carryforwards of $0.5 million which will expire beginning on June 30, 2030.

Given the release of the valuation allowance, a net deferred tax asset was recorded for $1.3 million as of June 30, 2020. A deferred tax liability of $0.2 million was recorded as of June 30, 2019 for deferred tax liabilities related to indefinite lived assets which cannot be used as a source of future taxable income, such as goodwill, in the amount of $0.3 million offset by the alternative minimum tax credit carryforward of $0.1 million.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security ("CARES") Act was enacted in response to the COVID-19 pandemic. The CARES Act, among other things, accelerates the Company’s ability to recover refundable AMT credits to 2018 and 2019. As such, the Company has recorded the remaining balance of its AMT credits as a current income tax receivable at June 30, 2020. The CARES Act did not have a material impact on the Company's income taxes.