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Income Taxes
 12 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES

11. INCOME TAXES

 

We recorded income tax (benefit) of $(0.8) million from operations and an income tax (benefit) of $(0.3) million for the years ended March 31, 2022 and 2021, respectively. For the year ended March 31, 2022, the $(0.8) income tax benefit primarily related to a net change of deferred tax liability resulted from the finalization of the acquisition of Foundation TV. The deferred tax liability was offset by a release of the Company’s valuation allowance. The Company also recorded income tax expense of $0.1, which was mainly related to taxable income at the state level and timing differences related to fixed asset depreciation. The income tax benefit for the year ended March 31, 2021 was mainly related to changes in estimates from the timing of the income tax provision to the income tax return filings, related to state income tax expense.

 

The following table presents the components of income tax benefit (expense):

 

   For the Fiscal Year
Ended March 31,		 
(In thousands)  2022   2021 
Federal:        
Current  $
—
   $
—
 
Deferred   672    
—
 
Total federal   672    
—
 
State:          
Current   (100)   315 
Deferred   216    
—
 
Total State   116    315 
Income tax benefit (expense)  $788   $315 

 

Net deferred taxes consisted of the following:

 

   As of March 31, 
(In thousands)  2022   2021 
Deferred tax assets:        
Net operating loss carryforwards  $15,853   $15,019 
Stock-based compensation   2,391    934 
Intangibles   5,247    5,879 
Accrued liabilities   1,216    1,054 
Allowance for doubtful accounts   865    845 
Investments   3,797    3,857 
Nondeductible interest expense   3,654    3,693 
Other   326    113 
Total deferred tax assets before valuation allowance   33,349    31,394 
Less: Valuation allowance   (33,212)   (30,969)
Total deferred tax assets after valuation allowance  $137   $425 
Deferred tax liabilities:          
Depreciation and amortization  $(137)  $(425)
Total deferred tax liabilities   (137)   (425)
Net deferred tax  $
—
   $
—
 

 

We have provided a valuation allowance equal to our net deferred tax assets for the years ended March 31, 2022 and 2021. We are required to recognize all or a portion of our deferred tax assets if we believe that it is more likely than not that such assets will be realized, given the weight of all available evidence. We assess the realizability of the deferred tax assets at each interim and annual balance sheet date. In assessing the need for a valuation allowance, we considered both positive and negative evidence, including recent financial performance, projections of future taxable income and scheduled reversals of deferred tax liabilities. The net change in the valuation allowance of $2.2 million during the fiscal year ended March 31, 2022 was mainly due to increases in the deferred tax asset related to the net operating loss carryfoward and other timing differences. The net change in the valuation allowance of $13.4 million during the fiscal year ended March 31, 2021 was mainly due to increases in the deferred tax asset related to our investment in Starrise, a related party, and increases in the net operating loss carryforward. We will continue to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based upon actual and forecasted operating results.

 

As of March 31, 2022, we had federal and state net operating loss carryforwards of approximately $55.2 million available in the United States of America (“U.S.”) to reduce future taxable income. U.S. federal and state net operating loss carryforwards of approximately $22.6 and $55.2 million, respectively, generally begin to expire in 2026. U.S. federal net operating loss carryforwards that were generated during the years ended March 31, 2020, 2021, and 2022 of approximately $32.6 million, do not expire.

 

Under the provisions of the Internal Revenue Code, certain substantial changes in our ownership may result in a limitation on the amount of net operating losses that may be utilized in future years. During the year ended March 31, 2018, approximately $233.5 million of our net operating losses became subject to limitation under Internal Revenue Code Section 382 in connection with the consummation in November 2017 of the transactions under the Stock Purchase Agreement with Bison. Approximately $209.0 million of our net operating losses will not be able to be utilized because of the ownership change. Future significant ownership changes could cause a portion or all of our remaining net operating losses to expire before utilization.

 

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The Act contains several new or changed income tax provisions, including but not limited to the following: increased limitation threshold for determining deductible interest expense; class life changes to qualified improvements (in general, from 39 years to 15 years); and the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years. The Company has evaluated the new tax provisions of the CARES Act and determined the impact to be either immaterial or not applicable.

 

The differences between the United States statutory federal tax rate and our effective tax rate are as follows:

 

   For the fiscal years
ended March 31,		 
   2022   2021 
Provision at the U.S. statutory federal tax rate   21.0%   21.0%
State income taxes, net of federal benefit   (83.7)%   5.7%
Change in valuation allowance   137.0%   (26.7)%
Non-deductible expenses   31.5%   (3.4)%
Executive officer compensation limitation – Section 162(m)   2.8%   
--
 
PPP loan forgiveness   (30.9)%   
--
 
Losses from non-consolidated entities   (131.1)%   3.8%
Other   0.2%   0.1%
Income tax benefit /(expense)   (53.2)%   0.5%

 

We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and Australia. For federal income tax purposes, our fiscal 2019 through 2022 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations. For U.S. state and Australian tax purposes, our fiscal 2018 through 2022 tax years generally remain open for examination by most of the tax authorities under a four-year statute of limitations.