Note 5 - Income Taxes

9 Months Ended

Dec. 31, 2022

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 5 — INCOME TAXES

At December 31, 2022, the Company had $16.0 million of U.S. federal net operating loss (“NOL”) carry forwards. These losses do not expire but are limited to utilization of 80% of taxable income in any one year. At December 31, 2022, the Company had approximately $18.7 million of U.S. state NOL carry forwards. The tax benefits related to these state NOL carry forwards and future deductible temporary differences are recorded to the extent management believes it is more likely than not that such benefits will be realized.

The income of foreign subsidiaries before taxes was $247,000 for the three month period ended December 31, 2022 as compared to income of foreign subsidiaries before taxes of $19,000 for the three month period ended December 31, 2021. The income of foreign subsidiaries before taxes was $489,000 for the nine month period ended December 31, 2022 as compared to income of foreign subsidiaries before taxes of $71,000 for the nine month period ended December 31, 2021.  

The Company analyzed the future reasonability of recognizing its deferred tax assets at December 31, 2022. As a result, the Company concluded that a 100% valuation allowance of $4,800,000 would be recorded against the assets.

Although the Company generated a net operating loss, it recorded income tax expense of nil and $10,500, respectively, during the three and nine month periods ended December 31, 2022, primarily resulting from state income taxes. During the three and nine month periods ended December 31, 2021, the Company recorded income tax expense of nil and $10,500, respectively, primarily resulting from state income taxes. After the adoption of ASU 2019-12 “Income Taxes (Topic 740) – Simplifying the Accounting for Income Taxes” during fiscal 2022, these non-income based state taxes are now reported within selling, general and administrative expenses.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of December 31, 2022, the Company’s open tax years for examination for U.S. federal tax are 2017-2021, and for U.S. states’ tax are 2016-2021. Based on the outcome of tax examinations or due to the expiration of statutes of limitations, it is reasonably possible that the unrecognized tax benefits related to uncertain tax positions taken in previously filed returns may be different from the liabilities that have been recorded for these unrecognized tax benefits. As a result, the Company may be subject to additional tax expense.

As of December 31, 2022, the Company is asserting under ASC 740-30 that all of the unremitted earnings of its foreign subsidiaries are indefinitely invested. The Company evaluates this assertion each period based on a number of factors, including the operating plans, budgets, and forecasts for both the Company and its foreign subsidiaries; the long-term and short-term financial requirements in the U.S. and in each foreign jurisdiction; and the tax consequences of any decision to repatriate earnings of foreign subsidiaries to the U.S.

As of December 31, 2022 and March 31, 2022, the Company had a federal tax liability of approximately $1,603,000 and $1,808,000, respectively, related to the repatriation of the Company’s undistributed earnings of its foreign subsidiaries as required by the Tax Cuts and Jobs Act of 2017 (the “Tax Act”). As of December 31, 2022, the Company’s short term portion was approximately $401,000 and the long term portion was approximately $1,202,000.

The liability is payable over 8 years. The first five installments are each equal to 8%, the sixth is equal to 15%, the seventh is equal to 20% and the final installment is equal to 25% of the liability. As of December 31, 2022, the Company has paid five of the eight installments. Each installment must be remitted on or before July 15^th of the year in which such installment is due.