G. Income Taxes

During fiscal 2026, we recorded U.S.-based domestic tax expense of $0.1 million and foreign tax expense of $0.3 million. During fiscal 2025, we recorded U.S.-based domestic tax benefit of $2.7 million and foreign tax expense of 0.1 million.

During fiscal 2026, we recorded a valuation allowance against net domestic deferred income tax assets of $5.6 million, representing the amount of our deferred income tax assets in excess of our domestic deferred income tax liabilities. We recorded the valuation allowance because management was unable to conclude, in light of the cumulative loss we have realized related to our US-based operations in recent years, that realization of the net deferred income tax asset was more likely than not. The valuation allowance recorded during fiscal 2026 primarily related to fiscal 2026 and changes in other deferred tax items recognized during fiscal 2026. As a result of the recognition of these valuation adjustments, we have a $10.4 million net deferred tax asset offset by a valuation allowance of $10.4 million resulting in a net deferred tax asset of $0 as of June 30, 2026. This valuation allowance did not have any effect on the tax expense and related liability recorded for operating income recognized by NAIE during the year ended June 30, 2026.

The following is a geographical breakdown of loss before income taxes (in thousands):

The provision (benefit) for income taxes for the years ended June 30 consisted of the following (in thousands):

Deferred income taxes reflect the net effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Net deferred tax assets and deferred tax liabilities as of June 30 were as follows (in thousands):

As of June 30, 2026, the Company had U.S. federal net operating loss carryforwards of $12.2 million which may be carried forward indefinitely. The Company has state net operating loss carryforwards of $9.6 million, which, if unutilized, will begin to expire beginning in fiscal year 2031. The Company has federal and state tax credits of $1.7 million, which, if unutilized, will begin to expire in fiscal year 2041.

Pursuant to Internal Revenue Code Section 382 and 383, annual use of our net operating loss carryforwards and tax credit carryforwards may be limited as a result of cumulative changes of ownership of more than 50% that occur within a three-year period, resulting in a change of control of our company. We believe it is more-likely-than-not that all net operating losses will be materially available to offset future taxable income. Future changes in ownership could impact the ability to utilize net operating losses and credits available to offset future taxable income. 

We are subject to taxation in the U.S., Switzerland and various U.S. state jurisdictions. Our tax years for the fiscal year ended June 30, 2021 and forward are subject to examination by the U.S. tax authorities. Our tax years for the fiscal years ended June 30, 2020 and forward are subject to examination by the state tax authorities. Our tax years for the fiscal year ended June 30, 2023 and forward are subject to assessment by the Swiss tax authorities. We believe it is more likely than not that all significant tax positions taken to date would be sustained by the relevant taxing authorities. As of  June 30, 2026 and 2025, there were no active taxing authority examinations in any of our major tax jurisdictions.

NAIE’s effective tax rate for the fiscal year ended  June 30, 2026 for Swiss federal, cantonal and communal taxes is approximately 18%.

As part of the Tax Cuts and Jobs Act of 2017 (the Tax Act), we were required to recognize a one-time deemed repatriation transition tax during the fiscal year ended June 30, 2018 based on our total post-1986 earnings and profits (E&P) from our Swiss subsidiary, NAIE. This accumulated E&P amount has historically been considered permanently reinvested thereby allowing us to defer recognizing any U.S. income tax on the amount. We no longer consider undistributed foreign earnings from NAIE as of December 31, 2017 as indefinitely reinvested. We consider earnings accumulated subsequent to December 31, 2017 as indefinitely reinvested.

For tax years commencing on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017, also eliminated the ability to immediately deduct research and development costs. Instead, taxpayers were mandated to capitalize these expenses and amortize them over five years for research conducted within the United States and 15 years for research conducted abroad, as stipulated in IRC Section 174. Although the requirements of the Tax Cuts and Jobs Act of 2017 are applicable for our fiscal year ended on June 30, 2026, the One Big Beautiful Bill Act was voted into law by Congress on July 4, 2025 and restores the immediate expensing of domestic research and development expenses while making permanent the capitalization and amortization rules of research and development conducted abroad. The One Big Beautiful Bill Act was effective beginning in our fiscal year 2026 and its impact is reflected in the changes in domestic other deferred tax items recognized during fiscal 2026, fully offset by a valuation allowance recorded during fiscal 2026. During fiscal 2026, NAIE declared a dividend to NAI of $3.1 million, which was paid in the second quarter of fiscal 2026. As part of these dividends, we were required to pay a 5% Swiss withholding tax totaling $0.2 million in fiscal 2026 which is recorded in the current tax provision. No dividends to NAI were declared by NAIE in fiscal 2025.

A reconciliation of the statutory federal income tax rate to the effective consolidated tax rate for the year ended  June 30, 2026, after adoption of ASU 2023-09, is as follows (dollars in thousands):

A reconciliation of the statutory federal income tax rate of 21% to the effective consolidated tax rate for the year ended June 30, 2025, prior to adoption of ASU 2023-09, is as follows (dollars in thousands):

We expect our U.S. federal statutory rate to be 21% for fiscal years going forward.

Cash paid during the fiscal year ended June 30, 2026 for income taxes, net of refunds is as follows: