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Income Tax Provision
 12 Months Ended
Mar. 31, 2023
Income Tax Provision  
Income Tax Provision

Note 19 — Income Tax Provision

  

The Company’s income tax provision can be affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which the Company operates, changes in tax laws and regulations in those jurisdictions, changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and other discrete items.

 

The components of pretax loss and income tax (benefit) expense are as follows (in thousands): 


 

 

Year Ended March 31,


 

 

2023

 

 

2022

 

Loss before income taxes:

 

 

 

 

 

 

Domestic

 

$

(9,954

)

 

$

(43,729

)

Foreign

 

 

-

 

 

 

-

 

Total loss before income taxes

 

$

(9,954

)

 

$

(43,729

)

The provision for income taxes consisted of the following:

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

U.S. Federal

 

$

-

 

 

$

-

 

State

 

 

70

 

 

 

22

 

Foreign

 

 

-

 

 

 

-

 

Total Current

 

 

70

 

 

 

22

 

 

 

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

 

U.S. Federal

 

 

2

 

 

 

86

State

 

 

(7

 )

 

 

75

Foreign

 

 

-

 

 

 

-

 

Total Deferred

 

 

(5

 )

 

 

161

Total provision for income taxes

 

$

65

 

 

$

183


The differences between income taxes expected at U.S. statutory income tax rates and the income tax provision are as follows (in thousands):

 

 

 

Year Ended March 31,


 

 

2023

 

 

2022

 

 

 

 

 

 

 

 

Income taxes computed at Federal statutory rate

 

$

(2,056

)

 

$

(9,183

)

State tax — net of federal benefit

 

 

(9

)

 

 

(1,343

)

Nondeductible expenses

 

 

1,292

 

 

 

-

 

Change in tax rates

 

 

86

 

 

(51

)

Change in valuation allowance

 

 

228

 

 

 

10,175

 

Stock compensation

371


-

Other

 

 

153

 

 

 

585

 

Total provision for income taxes

 

$

65

 

 

$

183


At March 31, 2023,the Company had available federal and state net operating loss carryforwards to reduce future taxable income of approximately $143.6 million and $91.7 million, respectively. The federal and state net operating loss carryforwards begin to expire on various dates beginning in 2028. Of the $143.6 million of federal net operating loss carryforwards, $54.1 million was generated in tax years beginning before March 31, 2018 and is subject to the 20-year carryforward period (“pre-Tax Act losses”), the remaining $89.5 million (“post-Tax Act losses”) can be carried forward indefinitely but is subject to the 80% taxable income limitation.

 

The Company obtained $136.0 million and $2.6 million of net operating loss and credit carryforwards, respectively, through the acquisition of Slacker, Inc. in December 2017. Utilization of these losses is limited by Section 382 and 383 of the Code in fiscal year end March 31, 2018 and each taxable year thereafter. The Company has estimated a limitation and revalued the losses and credits at $22.0 million and $0, respectively. It is possible that the utilization of these NOL carryforwards and tax credits may be further limited. The Company will undertake a study to determine the applicable limitations, if any. Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize the appropriate deferred tax asset at that time.

 

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by the federal and state jurisdictions where applicable. There are currently no pending income tax examinations. The Company’s tax years for 2017 and forward are subject to examination by the federal tax authorities and tax years for 2016 and forward are subject to examination by California tax authorities due to the carryforward of unutilized net operating losses. 

 

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of March 31, 2023 and 2022, the Company has not accrued interest or penalties related to uncertain tax positions.

 

Significant components of the Company’s deferred income tax assets and (liabilities) are as follows as of (in thousands):

 

 

 

Year Ended March 31,


 

 

2023

 

 

2022

 

Deferred tax assets:

 

 

 

 

 

 

Net operating loss carryforwards

 

$

35,760

 

 

$

36,368

 

Property and equipment

 

 

64

 

 

 

258

 

Accruals and reserves

 

 

1,393

 

 

 

1,718

 

Stock compensation

 

 

3,187

 

 

 

3,868

 

163 (j) interest expense carryforwards

 

 

2,000

 

 

 

1,125

 

Charitable contribution carryforward

 

 

18

 

 

 

69

 

Gross deferred tax assets

 

 

42,422

 

 

 

43,406

 

 

 

 

 

 

 

 

 

 

Deferred tax liabilities:

 

 

 

 

 

 

 

 

Right of use asset

 

 

(107

)

 

 

(185

 )

Intangible assets

 

 

(2,627

)

 

 

(3,767

)

Net deferred tax assets

 

 

39,688

 

 

39,454

 

Valuation allowance

 

 

(40,020

)

 

 

(39,792

)

Net deferred tax liability

 

$

(332

)

 

$

(338

)


As the ultimate realization of the potential benefits of a portion of the Company’s deferred tax assets is considered unlikely by management, the Company has offset the deferred tax assets attributable to those potential benefits through valuation allowances. Accordingly, the Company did not recognize any benefit from income taxes in the accompanying consolidated statements of operations to offset its pre-tax losses. The valuation allowance against deferred tax assets is $40.0 million and $39.8 million for the years ended March 31, 2023 and 2022, respectively. The valuation allowance increased by $0.2 million for the year ended March 31, 2023.