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Income Taxes
 12 Months Ended
Mar. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows (in thousands):
March 31,
20242023
Deferred tax assets:
Accrued sales tax liability
$5,126 $5,910 
Other accrued expenses
225 — 
Deferred stock compensation680 1,605 
Deferred revenue31 — 
Bad debt and inventory reserves440 21 
Capitalized research and development costs
317 — 
Lease liabilities
376 — 
    Net operating loss carryforward3,001 — 
Total deferred tax assets10,195 7,536 
Deferred tax liabilities:
Tax accounting method change
(541)— 
Intangible assets
(2,627)— 
Property and equipment
(1,041)(2,527)
Right of use assets
(376)— 
Total deferred tax liabilities
(4,585)(2,527)
Valuation allowance(624)— 
Total net deferred tax assets
$4,986 $5,009 
At March 31, 2024, the Company had $11.3 million of federal net operating loss carryforwards which begin to expire in fiscal 2024. The Company also had $9.0 million in state net operating loss carryforwards which begin to expire in fiscal 2026. In fiscal 2024 the Company acquired PetCareRx, a loss corporation. The tax attributes acquired are subject to Internal Revenue Code Section 382 which limits the utilization annually. The Company has determined the utilization of the state loss carryforwards is not likely to be realized. As a result, the Company has recorded a valuation allowance of $0.6 million for the tax effected value of these state losses. Outlined below are the tax attributes acquired and the balances remaining as of March 31, 2024 (in thousands).
PetCareRx Tax Attributes AcquiredTotalSec. 382 limited utilizationAttributes for which a deferred tax asset is recordedExpiration
Federal net operating losses - limited carryover85,45483,3002,154 Beginning in FY 2024
Federal net operating losses - unlimited carryover10,501—10,501 None
Disallowed business interest expense carryover1,855—1,855 None
State net operating losses11,0402,0668,974 Beginning in FY 2026
Tax Attribute as of March 31, 2024TotalSec. 382 limited utilizationAttributes for which a deferred tax asset is recordedExpiration
Federal net operating losses - limited carryover84,11483,300814 Beginning in FY 2025
Federal net operating losses - unlimited carryover10,501—10,501 None
Disallowed business interest expense carryover——0 None
State net operating losses11,0402,0668,974 Beginning in FY 2026
The components of the income tax provision consist of the following (in thousands):
Year Ended March 31,
202420232022
Current taxes
Federal$490 $2,623 $5,802 
State408 1,312 514 
Total current income tax provision
898 3,934 6,316 
Deferred income tax provision (benefit)
Federal412 (453)(778)
State(119)(1,176)(69)
Total deferred taxes293 (1,629)(847)
Total income tax provision
$1,191 $2,305 $5,469 
The reconciliation of income tax provision computed at the U.S. federal statutory tax rates to income tax expense is as follows (in thousands):
Year Ended March 31,
202420232022
Income taxes at federal statutory rates
$(1,317)$1,564 $5,078 
State income taxes, net of federal tax benefit304 107 428 
Non-deductible executive compensation
1,771 — — 
Other permanent differences
105 340 116 
Restricted stock shortfall adjustment
281 171 31 
Deferred tax adjustments
47 — — 
Other
— 124 (184)
Total income tax provision
$1,191 $2,305 $5,469 
In fiscal 2024, the Company recognized non-deductible executive stock compensation of approximately $1.8 million. This includes adjusting the deferred tax assets by a cumulative $1.0 million to account for future limitations under Sec. 162(m). This limits deductions for compensation of covered executives to $1.0 million per individual. In fiscal 2023, the Company recognized a stock compensation shortfall charge of approximately $171 thousand, and recognized a one-time charge of approximately $124 thousand, related to a return to provision true up from the fiscal 2022 income tax provision. In fiscal 2022, the Company recognized a stock compensation shortfall charge of approximately $31 thousand, and recognized a one-time benefit of approximately $184 thousand, related to a return to provision true up from the fiscal 2021 income tax provision.
The differences between the effective income tax rate and the statutory U.S. federal income tax rate are as follows:
Year Ended March 31,
202420232022
Federal rate on income before taxes21.0 %21.0 %21.0 %
State income taxes, net of federal tax benefit(4.9)%1.4 %1.8 %
Non-deductible executive compensation(28.2)%— %— %
Other permanent differences(1.7)%4.6 %0.5 %
Restricted stock shortfall adjustment(4.5)%2.3 %0.1 %
Deferred tax adjustments(0.8)%— %— %
Other— %1.7 %(0.8)%
Total Effective Tax Rate(19.0)%31.0 %22.6 %