v3.26.1
Income Taxes
 12 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

Note 12 — Income Taxes

The income tax expense consists of the following (in thousands):

 

Year ended June 30,

 

 

2026

 

 

2025

 

Income before income taxes:

 

 

 

 

 

 

Domestic

 

$

4,971

 

 

$

10,397

 

International

 

 

1,095

 

 

 

1,846

 

 

 

$

6,066

 

 

$

12,243

 

Current taxes:

 

 

 

 

 

 

Federal

 

$

(127

)

 

$

2,925

 

State

 

 

141

 

 

 

708

 

Foreign

 

 

603

 

 

 

491

 

Total current income tax provision

 

$

617

 

 

$

4,124

 

Deferred taxes:

 

 

 

 

 

 

Federal

 

$

519

 

 

$

(1,464

)

State

 

 

86

 

 

 

(341

)

Foreign

 

 

(228

)

 

 

119

 

Total deferred income tax expense

 

$

377

 

 

$

(1,686

)

Net income tax provision

 

$

994

 

 

$

2,438

 

 

The Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis beginning with the fiscal year ended June 30, 2026. The effective income tax rate for the fiscal year ended June 30, 2026 differs from the U.S. Federal statutory income tax rate due to the following:

 

Year ended June 30, 2026

Federal statutory income tax rate

 

$

1,274

 

 

 

21.0

 

%

Domestic state and local income taxes, net of federal effect(1)

 

 

214

 

 

 

3.5

 

%

Foreign tax rate differential

 

 

54

 

 

 

0.9

 

%

 

 

 

 

 

 

 

 

Non-taxable and non-deductible items

 

 

 

 

 

 

 

Meals and entertainment

 

 

95

 

 

 

1.6

 

%

Section 162(m) - Excess officer's compensation

 

 

137

 

 

 

2.2

 

%

Excess tax benefits on stock compensation

 

 

(250

)

 

 

(4.1

)

%

Other items, net

 

 

207

 

 

 

3.4

 

%

Total

 

 

189

 

 

 

3.1

 

%

 

 

 

 

 

 

 

 

Tax credits

 

 

 

 

 

 

 

Research and development credit

 

 

(555

)

 

 

(9.2

)

%

Foreign tax credit

 

 

(50

)

 

 

(0.8

)

%

Total

 

 

(605

)

 

 

(10.0

)

%

 

 

 

 

 

 

 

 

Cross-border tax laws, net

 

 

(131

)

 

 

(2.1

)

%

 

 

 

 

 

 

 

 

Change in valuation allowance

 

 

(1

)

 

 

-

 

%

 

 

 

 

 

 

 

 

Worldwide changes in unrecognized tax benefits

 

 

—

 

 

 

-

 

%

 

 

 

 

 

 

 

 

Net income tax provision

 

$

994

 

 

 

16.4

 

%

(1) The states making up 50% of the effect on the tax rate from state and local income tax effects are CA, MN, NE, TX, and UT.

 

The effective income tax rate for the fiscal year ended June 30, 2025 differs from the U.S. Federal statutory income tax rate is due to the following, based on the required disclosure prior to the adoption of ASU 2023-09:

 

 

Year ended June 30, 2025

Federal statutory income tax rate

 

 

21.0

 

%

State income taxes, net of federal benefits

 

 

3.4

 

%

Foreign tax rate difference

 

 

(0.4

)

%

Tax return to provision true-up

 

 

0.4

 

%

Limit on future stock compensation due to 162(m)

 

 

4.0

 

%

Foreign withholding tax

 

 

0.8

 

%

Other differences

 

 

0.7

 

%

Revalue of deferred for change in federal tax rate

 

 

0.0

 

%

Permanent differences:

 

 

 

 

— stock-based compensation

 

 

(6.2

)

%

— current year section 162(m) limitation

 

 

0.9

 

%

— foreign derived intangible income deduction

 

 

(1.4

)

%

— tax credits

 

 

(4.8

)

%

— meals and entertainment

 

 

0.6

 

%

— removal of additional permanent reinvestment assertions

 

 

0.6

 

%

— change in uncertain tax positions

 

 

(0.4

)

%

— accrual for foreign tax audits

 

 

0.4

 

%

— other permanent differences

 

 

0.7

 

%

Change in valuation allowance

 

 

(0.4

)

%

Net income tax provision

 

 

19.9

 

%

 

The Company adopted ASU 2023-09 on a prospective basis for the fiscal year ended June 30, 2026 and have included the following table as a result of the adoption, which presents income taxes paid (net of refunds received) for the fiscal year ended June 30, 2026 (in thousands):

 

 

Year ended June 30, 2026

 

US Federal

 

$

497

 

 

 

 

 

Domestic state and local

 

 

240

 

 

 

 

 

Foreign

 

 

 

Mexico

 

 

166

 

Australia

 

 

(87

)

Japan

 

 

129

 

Other

 

 

50

 

Total

 

 

258

 

 

 

 

 

Total

 

$

995

 

 

The components of the deferred tax assets and liabilities as of June 30, 2026 and 2025 are as follows (in thousands):

 

 

June 30,

 

 

2026

 

 

2025

 

Deferred tax assets

 

 

 

 

 

 

Federal, state, and foreign net operating loss carryovers

 

$

218

 

 

$

234

 

Stock option compensation

 

 

332

 

 

 

628

 

Section 174 costs

 

 

3,099

 

 

 

2,798

 

Lease liability

 

 

2,538

 

 

 

2,798

 

Accrued vacation, allowance for returns, bonuses and other

 

 

2,849

 

 

 

2,819

 

Gross deferred tax asset

 

$

9,036

 

 

$

9,277

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

Patents and trademarks

 

$

(27

)

 

$

(16

)

Property & equipment

 

 

(170

)

 

 

(239

)

Right of use asset

 

 

(1,739

)

 

 

(1,942

)

Other

 

 

(843

)

 

 

(468

)

Gross deferred tax liabilities

 

$

(2,779

)

 

$

(2,665

)

Less: valuation allowance

 

 

(628

)

 

 

(642

)

Deferred tax asset, net

 

$

5,629

 

 

$

5,970

 

 

The Company has adopted accounting guidance for uncertain tax positions (“UTPs”) which provides that in order to recognize an uncertain tax benefit, the taxpayer must be more likely than not of sustaining the position. The measurement of the benefit is calculated as the largest amount that is more than 50% likely to be realized upon recognition of the benefit.

 

In the fiscal year ended June 30, 2024, the Company began recording a withholding tax obligation on certain rebalanced commission payments to the U.S. parent company it had not obtained treaty rates for. The withholding tax recorded in the fiscal year ended June 30, 2024 has been reversed during the fiscal year ended June 30, 2025 as the Company no longer expects to pay that liability.

 

The Company has been undergoing income tax audits in foreign jurisdictions. For the fiscal year ended June 30, 2025, the Company accrued a total $0.4 million related to foreign income tax audits. In fiscal year 2025, the Company made payments or deemed payments totaling $0.4 million related to these foreign income tax audits. The Company also increased the amount of the UTP relating to the prior year to reflect the actual payments that were made. The UTP related to foreign tax audits is zero

for the fiscal years ended June 30, 2026 and 2025. The Company does not have any other foreign tax audits underway as of June 30, 2026.

 

The change in the liability for uncertain tax positions were as follows (in thousands):

 

 

Year ended June 30,

 

 

2026

 

 

2025

 

Beginning balance

 

$

—

 

 

$

389

 

Gross increases - tax positions in prior year

 

 

—

 

 

 

51

 

Gross decreases - tax positions in prior year

 

 

—

 

 

 

(53

)

Gross increases - tax positions in current year

 

 

—

 

 

 

—

 

Settlement

 

 

—

 

 

 

(381

)

Currency adjustment

 

 

—

 

 

 

(6

)

Ending balance

 

$

—

 

 

$

—

 

 

In fiscal year 2022, the Company removed its permanent reinvestment assertion in Japan. In fiscal year 2024, the Company removed its permanent reinvestment assertions in Taiwan and Australia and recorded the tax effects of that change. In fiscal year 2025, the Company removed its permanent reinvestment assertion on all other entities. In fiscal year 2026, the Company recorded the 986(c) adjustment related to the unrepatriated earnings. This adjustment largely reflects the significant change in the foreign currency rate between the United States and Japan on Japan's previously taxed earnings and profits ("PTEP").

 

The Company recorded all tax effects of these changes as discrete items. The Company has minor PTEP and most future dividends will be excluded under the United States Internal Revenue Code Section 245A. The withholding tax and state tax implications are minimal.

 

The change in the valuation allowance were as follows (in thousands):

 

 

Year ended June 30,

 

 

2026

 

 

2025

 

Beginning balance

 

$

642

 

 

$

720

 

Decreases

 

 

(14

)

 

 

(78

)

Ending balance

 

$

628

 

 

$

642

 

The change in valuation allowance during the fiscal year ended June 30, 2026 primarily related to small changes in foreign entities with full valuation allowances. The change in valuation allowance during the fiscal year ended June 30, 2025 related to a decrease in the valuation allowance on state net operating losses ("NOLs"). Due to higher projected taxable income, the Company felt it was appropriate to reduce the valuation allowance. There were also insignificant changes in other entities with full valuation allowances.

As of June 30, 2026, the Company had utilized all of its Federal NOL carry-forwards. As of June 30, 2026, state NOLs were $4.8 million and foreign NOLs were $0.3 million.

The total recognized tax benefit from settlement of stock-based awards for the fiscal years ended June 30, 2026 and 2025, was $0.2 million and $0.8 million, respectively.

The Company has reflected all changes in tax laws including the changes resulting from expiring Tax Cuts and Jobs Act provisions that were effective for the fiscal year ended June 30, 2026.

The Company conducts its business globally. As a result, the Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions, and are subject to examination for the open tax years of June 30, 2022 through June 30, 2025.