Note 5 - Income Taxes

12 Months Ended

Mar. 31, 2023

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 5 — INCOME TAXES:

The Company’s provision for income tax expense for fiscal 2023 and fiscal 2022 was as follows:

	2023		2022
	(In thousands)
Current:
Federal	$	—	$	—
Foreign, state and other		—		—
Deferred:
Federal		—		—
Foreign, state and other		—		—
Provision for income tax expense	$	—	$	—

The Company adopted ASU 2019-12 (Topic 740) Simplifying the Accounting for Income Taxes during fiscal 2022. In the table above, the income tax expense of $7,000 in fiscal 2023 and $11,000 in fiscal 2022, was removed as it represented non-income based taxes.

The Company files a consolidated federal return and certain state and local income tax returns.

The difference between the effective rate reflected in the provision for income taxes and the amounts determined by applying the statutory federal rate of 21% to earnings before income taxes for fiscal 2023 and fiscal 2022 is analyzed below:

	2023			2022
	(In thousands)
Statutory provision	$	(286	)	$	(765	)
Foreign subsidiary		(162	)		(4	)
State taxes		(86	)		(180	)
Permanent differences		148			12
Adjustment to prior year taxes		(8	)		93
Valuation allowance		394			844
Provision for income tax expense	$	—		$	—

As of March 31, 2023 and March 31, 2022, the significant components of the Company’s deferred tax assets which were classified as non-current, were as follows:

	2023			2022
	(In thousands)
Deferred tax assets:
Accounts receivable reserves	$	34		$	34
Inventory		260			209
Accruals		9			14
Property and equipment and intangible assets		14			39
Net operating loss and credit carry forwards		4,437			4,064
Valuation allowance		(4,754	)		(4,360	)
Total deferred tax assets	$	—		$	—

The Company has $15.8 million of U.S. federal net operating loss carry forwards (“NOLs”) and $19.0 million of state NOLs as of March 31, 2023 as follows:

March 31, 2023

		Federal NOLs		State NOLs
Loss Year (Fiscal)	Included in DTA (in millions)		Included in DTA (in millions)		Expiration Year (Fiscal)
2016	$	—	$	1.4		2034
2017	$	—	$	0.8		2036
2018	$	—	$	2.6		2037
2019	$	3.3	$	2.7		2038
2020	$	3.7	$	3.0		2039
2021	$	4.0	$	3.7		2040
2022	$	3.4	$	3.4		2041
2023	$	1.4	$	1.4		2042
Total	$	15.8	$	19.0

The tax benefits related to these state NOLs 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 $772,000 for the fiscal year ended March 31, 2023 as compared to income before taxes of $99,000 for the fiscal year ended March 31, 2022, respectively.

The Company analyzed the future reasonability of recognizing its deferred tax assets at March 31, 2023. As a result, the Company concluded that a valuation allowance of approximately $4,754,000 would be recorded against the assets.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of March 31, 2023, the Company’s open tax years for examination for U.S. federal tax are 2017-2023, and for U.S. states’ tax are 2012-2023. 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 March 31, 2023 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.

The Tax Cut and Job Act (“TCJA”) establishes new tax rules designed to tax U.S. companies on global intangible low-taxed income (GILTI) earned by foreign subsidiaries. The Company has evaluated this provision of the TCJA and the application of ASC 740 and its impact is reflected in the financial statements as of March 31, 2023.