Note 12. Income Taxes

Income (loss) before provision for income taxes on the accompanying statements of operations and comprehensive loss included the following components (in thousands):

The provision for income taxes consisted of the following (in thousands):

The Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, on a prospective basis beginning with the year ended June 30, 2026. The following table presents required disclosures pursuant to ASU 2023-09 and reconciles the U.S. statutory federal income tax amount and rate to the Company's effective income tax amount and rate for the fiscal year ended June 30, 2026 (in thousands, except for percentages):

The following table presents the required disclosures prior to the Company's adoption of ASU 2023-09 and reconciles the U.S. statutory federal income tax rate to the Company's effective income tax rate as follows:

Upon adoption of ASU 2023-09, cash paid for income taxes, net of refunds received, were as follows (in thousands):

The amount of cash paid for income taxes during the year ended June 30, 2025 was $3.9 million.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred tax assets (liabilities) were as follows (in thousands):

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company's history of operating losses, the Company has concluded that it is more likely than not that the benefit of its domestic deferred tax assets will not be realized. The valuation allowance increased by $8.8 million during the year ended June 30, 2026, primarily due to increases in deferred tax assets related to net operating loss carryforwards and U.S. limitations on the deductibility of interest expense. The valuation allowance decreased by $0.7 million during the year ended June 30, 2025, primarily due to a decrease in deferred tax assets related to net operating loss carryforwards, partially offset by an increase in deferred tax assets related to capitalized research and development expenditures.

As of June 30, 2026, the Company had $276.9 million and $124.5 million in federal and state net operating loss carryforwards, respectively. The federal and state carryforwards expire in varying amounts beginning in 2029 for federal and 2027 for state purposes.

In addition, as of June 30, 2026, the Company had federal and state research and development tax credits of $27.9 million and $23.1 million, respectively. If not utilized, the federal and certain other state research credits expire on an annual basis. The California research credits have no expiration date.

Under the Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss and research tax credit carryforwards to offset taxable income may be limited based on cumulative changes in ownership. Although ownership changes have occurred in the prior years, the carryovers should be available for utilization by the Company before they expire, provided the Company generates sufficient future taxable income. An analysis of the impact of this provision through March 31, 2022 has been performed and it was determined that no ownership change has occurred after December 2009.

H.R.1, enacted on July 4, 2025, introduced provisions that modified the Internal Revenue Code (“IRC”), The legislation includes significant revisions to U.S. corporate income tax laws, including, among other provisions, restoring the option for immediate expensing of certain U.S.-based research and development expenditures and making permanent the ability to claim first-year bonus depreciation on qualified property. The legislation also modifies certain aspects of U.S. taxation of foreign earnings, including changes to the taxation of Net CFC Tested Income (formerly referred to as global intangible low-taxed income (“GILTI”)) and foreign-derived deduction eligible income, as well as revisions to foreign tax credit rules. The enactment of the legislation did not have a material impact on the Company’s consolidated financial statements due to the Company’s cumulative losses and full valuation allowance position.

At June 30, 2026, the Company has $1.9 million of deferred tax liability related to withholding tax expected to be paid on the remittance of unrepatriated distributable reserves in France, Japan, Switzerland and China. At June 30, 2026, the Company has undistributed earnings of certain foreign subsidiaries of $13.5 million that it has indefinitely invested, and on which it has not recognized deferred taxes.

The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in thousands):

The calculation of unrecognized tax benefits involves dealing with uncertainties in the application of complex global tax regulations. Management regularly assesses the Company’s tax positions with respect to legislative, bilateral tax treaty, regulatory and judicial developments in the countries in which the Company does business. The reduction in prior year’s tax positions primarily relates to lapses of applicable statutes of limitations. As of June 30, 2026, the amount of gross unrecognized tax benefits was $22.8 million, of which $21.8 million would not affect income tax expense before consideration of any valuation allowance.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. As of June 30, 2026 and 2025, the Company’s cumulative accrued interest and penalties related to uncertain tax positions, was not material.

The Company files income tax returns in the United States federal, various states, and foreign jurisdictions. Due to tax attributes being carried forward and utilized during open years, the statute of limitations remains open for the U.S. federal jurisdiction and domestic states for tax years from 2007 and forward. The statutes of limitation with respect to the foreign jurisdictions where the Company files income tax returns vary from jurisdiction to jurisdiction and range from 3 to 10 years and the material foreign jurisdictions are France, Switzerland and Japan.

The Company is subject to examination of its income tax returns by the Internal Revenue Service ("IRS") and various foreign tax authorities. In certain jurisdictions, the Company has received additional tax assessments, none of which has been material. The Company is currently under examination by the Indian tax authorities for fiscal year 2021. The Company has also received a notice from the IRS regarding an examination of its U.S. federal income tax returns for the fiscal years ended June 30, 2024 and 2025. The Company does not expect the resolution of these examinations to have a material effect on its consolidated financial statements.