For financial reporting purposes, net loss showing domestic and foreign sources was as follows (in thousands):
| | | Year Ended June 30, |
| | | 2017 | | 2016 |
| Domestic | | $ | (6,238 | ) | | $ | (7,591 | ) |
| Foreign | | | (22,242 | ) | | | (12,813 | ) |
| Net loss | | $ | (28,480 | ) | | $ | (20,404 | ) |
Provision for income taxes
The following is a reconciliation of income taxes at the statutory federal income tax rate of
35%
to the income tax provision (benefit) recorded (in thousands):
| | | June 30, |
| | | 2017 | | 2016 |
| Net loss before income tax | | $ | (28,480 | ) | | $ | (20,404 | ) |
| Computed tax benefit at statutory rate | | | (9,968 | ) | | | (7,141 | ) |
| Taxes in foreign jurisdictions with rates different than US | | | (810 | ) | | | 4,589 | |
| Other | | | 965 | | | | 789 | |
| Valuation allowance | | | 9,813 | | | | 1,763 | |
| Income tax expense | | $ | — | | | $ | — | |
Net deferred tax assets of continuing operations consisted of the following (in thousands):
| | | June 30, |
| | | 2017 | | 2016 |
| Deferred tax assets (liabilities): | | | | | | | | |
| Net operating loss carry forward | | $ | 16,429 | | | $ | 16,221 | |
| Depreciation and amortization | | | 63 | | | | 120 | |
| Stock-based expense | | | 8,549 | | | | 8,070 | |
| Investment in joint ventures | | | 13,281 | | | | 4,124 | |
| Accruals | | | 255 | | | | 229 | |
| AMT credit | | | 138 | | | | 138 | |
| Subtotal | | | 38,715 | | | | 28,902 | |
| Valuation allowance | | | (38,715 | ) | | | (28,902 | ) |
| Net deferred assets | | $ | — | | | $ | — | |
At
June 30, 2017,
the Company had approximately
$45.1
million of U.S. federal net operating loss (“NOL”) carry forwards, and
$2.6
million of China NOL carry forwards. The U.S. federal NOL carry forwards have expiration dates through the year
2037.
The China NOL carry forwards have expiration dates through
2022.
As of
June 30, 2017
and
2016,
deferred tax assets of approximately
and
million were included in discontinued operations and were offset by a full valuation allowance.
The Company’s tax returns are subject to periodic audit by the various taxing jurisdictions in which the Company operates, which can result in adjustments to its NOLs. There are
no
significant audits underway at this time.
In assessing the Company’s ability to utilize its deferred tax assets, management considers whether it is more likely than
not
that some portion or all of the deferred tax assets will
not
be realized. Based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than
not
that the Company will
not
realize the benefits of these deductible differences. Future changes in estimates of taxable income or in tax laws
may
change the need for the valuation allowance.
The Company and
two
of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. The Company has been subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax authorities for all tax years since its operations began in
2003.
As of
June 30, 2017,
the domestic and foreign tax authorities have
not
proposed any adjustments to the Company’s material tax positions. The Company establishes reserves for positions taken on tax matters which, although considered appropriate under the regulations, could potentially be successfully challenged by authorities during a tax audit or review. The Company did
have any liability for uncertain tax positions as of
June 30, 2017
or
2016.