XML 40 R25.htm IDEA: XBRL DOCUMENT v3.25.1
Income Taxes
 12 Months Ended
Mar. 31, 2025
Income Taxes [Abstract]  
Income Taxes
17. Income Taxes
 
Domestic and foreign components of (loss) income before income taxes are as follows:
 
   
Years Ended March 31,
     
2025
     
2024
     
2023
 
Domestic and foreign components of (loss) income
           
United States
   $(21,526,000)    $(29,661,000)    $(14,470,000) 
Foreign
    5,839,000     16,593,000     11,361,000 
Loss before income taxes
    (15,687,000)     (13,068,000)     (3,109,000) 
The income tax expense is as follows:
 
                   
   
Years Ended March 31,
     
2025
     
2024
     
2023
 
Current tax expense
                 
Federal
  $1,177,000    $1,696,000    $2,483,000 
State
   631,000     363,000     396,000 
Foreign
   3,780,000     4,553,000     3,426,000 
Total current tax expense
   5,588,000     6,612,000     6,305,000 
Deferred tax (benefit) expense
                 
Federal
   (171,000)     25,320,000     (5,037,000) 
State
   (28,000)     4,249,000     (705,000) 
Foreign
   (1,606,000)     (5,000)     535,000 
Total deferred tax (benefit) expense
   (1,805,000)     29,564,000     (5,207,000) 
Total income tax expense
  $3,783,000    $36,176,000    $1,098,000 
 
Deferred income taxes consist of the following:
 
         
      March 31, 2025       March 31, 2024  
Assets
           
Allowance for bad debts
  $48,000    $44,000 
Customer allowances earned
   3,794,000     4,706,000 
Allowance for stock adjustment returns
   3,344,000     3,620,000 
Inventory adjustments
   8,497,000     7,419,000 
Intangibles, net
   729,000     852,000 
Stock options
   2,561,000     2,723,000 
Operating lease liabilities
   19,333,000     21,251,000 
Estimate for returns
   30,341,000     29,942,000 
Accrued compensation
   2,585,000     2,600,000 
Net operating losses
   3,426,000     4,670,000 
Tax credits
   2,857,000     2,054,000 
Capitalized research credits
   1,147,000     1,158,000 
Plant and equipment, net
   1,460,000     1,010,000 
Other
   4,639,000     6,588,000 
Total deferred tax assets
  $84,761,000    $88,637,000 
Liabilities
           
Contract assets
   (9,020,000)     (10,265,000) 
Operating lease assets
   (16,848,000)     (23,845,000) 
Other
   (2,453,000)     (6,663,000) 
Total deferred tax liabilities
  $(28,321,000)    $(40,773,000) 
Less: valuation allowance
  $(52,233,000)    $(45,399,000) 
Total deferred taxes
  $4,207,000    $2,465,000 
 
As of March 31, 2025, before tax effect, the Company had federal net operating loss carryforwards of $1,694,000, state net operating loss carryforwards of $166,000 and foreign net operating loss carryforwards of $11,610,000. The federal net operating loss carryforwards expire beginning in fiscal year 2034, the state net operating loss carryforwards expire beginning in fiscal year 2032, and the foreign net operating loss carryforwards expire beginning in fiscal year 2038. As of March 31, 2025, the Company also had non-US tax credit carryforwards of $2,857,000, which will expire beginning in fiscal year 2034.
Realization of deferred tax assets is dependent upon the Company’s ability to generate sufficient future taxable income. Significant judgment is required in determining the Company’s provision for income taxes, deferred tax assets and liabilities and any valuation allowance recorded against the Company’s net deferred tax assets. The Company makes these estimates and judgments about its future taxable income that are based on assumptions that are consistent with the Company’s future plans. A valuation allowance is established when the Company believes it is not more likely than not all or some deferred tax assets will be realized. In evaluating the Company’s ability to recover deferred tax assets within the jurisdiction in which they arise, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, past financial performance, and tax planning strategies. The net increase in the valuation allowance was $6,834,000 during the year ended March 31, 2025. This net increase in the valuation allowance is primarily due to the increase in the Company’s U.S. federal and various state deferred tax assets and the establishment of a valuation allowance on one of its Mexican subsidiaries partially offset by the reversal of the valuation allowance of one of its Canadian subsidiary’s deferred tax assets. The Company will continue to monitor its position in future periods. Should the actual amount differ from the Company’s estimates, the amount of any valuation allowance could be impacted.
 
For the years ended March 31, 2025, 2024, and 2023, the primary components of the Company’s income tax expense were (i) federal income taxes, (ii) state income taxes, (iii) change in realizable deferred tax items, (iv) foreign income taxed at rates that are different from the federal statutory rate, and (v) impact of the non-deductible executive compensation under Internal Revenue Code Section 162(m). In addition, for the years ended March 31, 2025 and 2024, the Company’s income tax expense included the impact of an excess tax benefit from share-based compensation.
 
The difference between the income tax expense at the federal statutory rate and the Company’s effective tax rate is as follows:
 
                      
    Years Ended March 31,
    2025   2024   2023
                      
Statutory federal income tax rate
   21.0 %    21.0 %    21.0 %
State income tax rate, net of federal benefit
   1.5 %    10.8 %    3.5 %
Excess tax benefit from share-based compensation
   (1.3 )%    (4.8 )%    - %
Foreign income taxed at different rates
   (3.8 )%    (9.8 )%    (28.7 )%
Non-deductible debt costs
   (1.2 )%    - %
    - %
Non-deductible executive compensation
   (2.5 )%    (2.6 )%    (9.0 )%
Change in valuation allowance
   (40.1 )%    (289.1 )%    (25.8 )%
Uncertain tax positions
   2.6 %    0.9 %    (1.0 )%
Research and development credit
   0.6 %    0.7 %    2.7 %
Other
   (0.9 )%    (3.9 )%    2.0 %
     (24.1 )%    (276.8 )%    (35.3 )%
 
The Company and its subsidiaries file income tax returns for the U.S. federal, various state, and foreign jurisdictions with varying statutes of limitations. At March 31, 2025, the Company remains subject to examination for fiscal years ended March 31, 2022 and forward. The Company believes no significant changes in the unrecognized tax benefits will occur within the next 12 months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
 
                   
    Years Ended March 31,
      2025       2024       2023  
                   
Balance at beginning of period
  $1,784,000    $1,964,000    $1,975,000 
Additions based on tax positions related to the current year
   53,000     15,000     53,000 
Additions for tax positions of prior year
   43,000     15,000      -  
Reductions for tax positions of prior year
   (518,000)     (210,000)     (64,000) 
Balance at end of period
  $1,362,000    $1,784,000    $1,964,000 
 
At March 31, 2025, 2024 and 2023, there are $1,112,000, $1,475,000, and $1,616,000, respectively, of unrecognized tax benefits that if recognized would affect the annual effective tax rate.
 
The Company recognizes interest and penalties related to unrecognized tax benefits as part of income tax expense. During the years ended March 31, 2025, 2024, and 2023, the Company recognized interest and penalties of approximately $49,000, $21,000, and $59,000, respectively. The Company had approximately $203,000 and $250,000 for the payment of interest and penalties accrued at March 31, 2025 and 2024, respectively.
 
The Company intends to indefinitely reinvest its undistributed earnings from foreign subsidiaries in foreign operations, with the exception of earnings from its Singapore subsidiary. No incremental U.S. federal tax or withholding taxes have been provided for these earnings.