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Income Taxes | 12 Months Ended
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Mar. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 9. Income Taxes For the year ended March 31, income (loss) before income taxes consisted of the following:
(In thousands) |  |  | 2023 |  |  |  | 2022 |  |  |  | 2021 |
Income (loss) before income taxes |  |  |  |  |  |  |  |  |
United States |  | $ | 14,526 |  |  | $ | 1,598 |  |  | $ | (26,272 | )
Foreign |  |  | 1,238 |  |  |  | 4,913 |  |  |  | 5,063 |
Total income (loss) before income taxes |  | $ | 15,764 |  |  | $ | 6,511 |  |  | $ | (21,209 | )
For the year ended March 31, income tax expense (benefit) consisted of the following:
(In thousands) |  |  | 2023 |  |  |  | 2022 |  |  |  | 2021 |
Income tax expense (benefit) |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | 87 |  |  | $ | 62 |  |  | $ | 9 |
State and local |  |  | 277 |  |  |  | 21 |  |  |  | 30 |
Foreign |  |  | 1,070 |  |  |  | 853 |  |  |  | 731 |
Deferred: |  |  |  |  |  |  |  |  |
Federal |  |  | 12 |  |  |  | 12 |  |  |  | 12 |
State and local |  |  | 77 |  |  |  | 7 |  |  |  | 32 |
Foreign |  |  | (341 | ) |  |  | (922 | ) |  |  | (1,022 | )
Total income tax expense (benefit) |  | $ | 1,182 |  |  | $ | 33 |  |  | $ | (208 | )
The following table presents the principal components of the difference between the effective tax rate and the U.S. federal statutory income tax rate for the years ended March 31:
(In thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Income tax expense (benefit) at the US Federal statutory rate |  | $ | 3,340 |  |  | $ | 1,368 |  |  | $ | (4,454 | )
Expense (benefit) for state taxes |  |  | 377 |  |  |  | (65 | ) |  |  | (803 | )
Impact of foreign operations |  |  | (78 | ) |  |  | (819 | ) |  |  | (841 | )
Indefinite life assets |  |  | 20 |  |  |  | 19 |  |  |  | 43 |
Intercompany gain |  |  | 177 |  |  |  | — |  |  |  | — |
Change in valuation allowance |  |  | (2,276 | ) |  |  | (2,623 | ) |  |  | 7,271 |
Change in liability for unrecognized tax benefits |  |  | 24 |  |  |  | 25 |  |  |  | 26 |
Share-based compensation |  |  | (241 | ) |  |  | (2,018 | ) |  |  | (2,232 | )
Global intangible low-taxed income |  |  | 101 |  |  |  | 971 |  |  |  | 985 |
Deferred adjustments |  |  | (281 | ) |  |  | (260 | ) |  |  | (478 | )
Provision to return |  |  | (31 | ) |  |  | 3,438 |  |  |  | 278 |
Other |  |  | 50 |  |  |  | (3 | ) |  |  | (3 | )
Total income tax expense (benefit) |  | $ | 1,182 |  |  | $ | 33 |  |  | $ | (208 | )
We have elected to account for global intangible low-taxed income (GILTI) inclusions in the period in which they are incurred. The fiscal 2023 tax provision results primarily from foreign tax expense and minimal expense from the U.S. The fiscal 2023 tax provision differs from the statutory rate primarily due to adjustments to deferred tax assets; offset by current year expense in foreign jurisdictions. The fiscal 2022 tax provision results primarily from foreign tax benefit. The fiscal 2022 tax provision differs from the statutory rate primarily due to adjustments to deferred tax assets and the recording of net operating losses in a number of foreign jurisdictions offset by current year expense in other foreign jurisdictions. Deferred tax assets and liabilities as of March 31, are as follows:
(In thousands) |  | 2023 |  |  | 2022 |
Deferred tax assets: |  |  |  |  |  |
Accrued liabilities |  | $ | 8,748 |  |  | $ | 7,574 |
Allowance for expected credit losses and doubtful accounts |  |  | 132 |  |  |  | 83 |
Federal losses and credit carryforwards |  |  | 36,912 |  |  |  | 50,612 |
Foreign losses and credit carryforwards |  |  | 3,555 |  |  |  | 2,793 |
State losses and credit carryforwards |  |  | 10,080 |  |  |  | 11,179 |
Deferred revenue |  |  | 291 |  |  |  | 193 |
Capitalized research expenses |  |  | 11,399 |  |  |  | — |
Property and equipment and software amortization |  |  | 325 |  |  |  | 416 |
Operating lease liabilities |  |  | 4,171 |  |  |  | 1,489 |
Goodwill and other intangible assets |  |  | (536 | ) |  |  | 607 |
Other |  |  | 185 |  |  |  | 163 |
|  |  | 75,262 |  |  |  | 75,109 |
Less: valuation allowance |  |  | (67,928 | ) |  |  | (69,515 | )
Total |  |  | 7,334 |  |  |  | 5,594 |
Deferred tax liabilities: |  |  |  |  |  |
Operating lease right-of-use assets |  |  | (3,153 | ) |  |  | (1,269 | )
Goodwill and other intangible assets |  |  | (3,659 | ) |  |  | (2,575 | )
Other |  |  | 12 |  |  |  | (15 | )
Total |  |  | (6,800 | ) |  |  | (3,859 | )
Total deferred tax assets, net |  | $ | 534 |  |  | $ | 1,735 |
At March 31, 2023, we had $132.0 million of federal net operating loss carryforwards that expire, if unused, in fiscal years 2033 to 2039, and $43.8 million of federal net operating loss carryforwards that can be carried forward indefinitely. Our Hong Kong, Canada, Singapore and Australia subsidiaries have $0.6 million, $0.6 million, $0.5 million and $0.1 million of net operating loss carryforwards, respectively. The losses for Hong Kong, Singapore and Australia can be carried forward indefinitely. Canada losses can be carried back three years and carried forward 20 years. Our India subsidiary operates in a “Special Economic Zone (“SEZ”)”. One of the benefits associated with the SEZ is that the India subsidiary is not subject to regular India income taxes during its first 5 years of operations which includes fiscal 2018 through fiscal 2022. The India subsidiary is then subject to 50% of regular India income taxes during the second five years of operations which includes fiscal 2023 through fiscal 2027. The aggregate value of the benefit of the SEZ during the current fiscal year is $2.7 million as of March 31, 2023. The Company has paid minimum alternative taxes during the period of regular tax relief resulting in a credit of $1.8 million as of March 31, 2023. At March 31, 2023 we also had $133.9 million of state net operating loss carryforwards that expire, if unused, in fiscal years 2024 through 2042. The Tax Cuts and Jobs Act of 2017 (TCJA) made a significant change to Internal Revenue Code Section 174, which went into effect for taxable years beginning after December 31, 2021. The change requires Companies to capitalize specific research and experimental (“R&E”) expenditures and amortize over five years for U.S. incurred R&E or fifteen years for foreign incurred R&E beginning on January 1, 2022. The mandatory capitalization requirement increases our deferred tax assets but does not impact our cash tax liabilities in the current period. We have recorded valuation allowances offsetting substantially all the Company’s deferred income tax assets due to the uncertainty of the ultimate realization of the future benefits from those assets. At March 31, 2023, the total valuation allowance against deferred tax assets of $67.9 million was comprised of $66.2 million for federal and state deferred tax assets, and $1.7 million associated with deferred tax assets in Hong Kong, Canada, Singapore, the Philippines and Australia. The ultimate realization of deferred tax assets depends on various factors including the generation of taxable income during the future periods in which the underlying temporary differences are deductible. We consider the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected earnings, and tax planning strategies in our assessment of positive and negative evidence supporting the likelihood of deferred tax asset realization. We maintain valuation allowances for deferred tax assets until we have sufficient evidence to support the reversal of all or some portion of the allowances. Based on recent earnings and anticipated future earnings, we believe it is reasonably possible that within the next 12 months we will have sufficient positive evidence to conclude that a significant portion of our valuation allowances will no longer be needed. Releasing the valuation allowances would result in the recognition of certain deferred tax assets and significant income tax benefits. The exact timing and amount of the valuation allowance releases will depend on the level of profitability that we are able to achieve and our visibility into future results. Our recorded effective tax rate may increase in subsequent periods following a valuation release. Any valuation allowance release will not impact the amount of cash paid for income taxes. The undistributed earnings of our foreign subsidiaries are not subject to U.S. federal and state income taxes unless such earnings are distributed in the form of dividends or otherwise to the extent of current and accumulated earnings and profits. The undistributed earnings of foreign subsidiaries are permanently reinvested and totaled $22.2 million and $17.1 million as of March 31, 2023 and 2022, respectively. We made the determination of permanent reinvestment on the basis of sufficient evidence that demonstrates we will invest the undistributed earnings overseas indefinitely for use in working capital, as well as foreign acquisitions and expansion. The determination of the amount of the unrecognized deferred U.S. income tax liability related to the undistributed earnings is not practicable. As of March 31, 2023, we had a liability of $0.6 million related to uncertain tax positions, the recognition of which would impact our effective income tax rate. There have been no changes to our uncertain tax positions during the three years ended March 31, 2023. We recognize interest accrued on any uncertain tax positions as a component of income tax expense. Penalties are recognized as a component of general and administrative expenses. We recognized interest and penalty expense of less than $0.1 million for the years ended March 31, 2023, 2022 and 2021. As of March 31, 2023 and 2022, we had approximately $0.6 million and $0.6 million, respectively, of interest and penalties accrued in other non-current liabilities on our Consolidated Balance Sheets. We are consistently subject to tax audits. Due to the nature of examinations in multiple jurisdictions, changes could occur in the amount of gross unrecognized tax benefits during the next 12 months that we cannot anticipate. Although the timing and outcome of tax settlements remain uncertain, we expect that, as a result of the expiration of various statutes of limitations, a reduction in unrecognized tax benefits is more likely than not to occur during the next 12 months. In the U.S. we file consolidated federal and state income tax returns where statutes of limitations generally range from three to five years. Although we have resolved examinations with the IRS through tax year ended March 31, 2010, U.S. federal tax years are open from 2011 forward due to attribute carryforwards. The statute of limitations is open from fiscal year 2018 forward in certain state jurisdictions. We also file income tax returns in international jurisdictions where statutes of limitations generally range from three to seven years. Years beginning after 2016 are open for examination by certain foreign taxing authorities.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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