Income Taxes

12 Months Ended

Mar. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

Income tax expense consists of the following for the years ended March 31:

	(In thousands)
	2024		2023
Current:
Federal	$	-	$	22
State		-		10
Total current		-		32
Deferred:
Federal		-		708
State		-		677
Total deferred		-		1,385
Income tax expense	$	-	$	1,417

The net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes are reflected in deferred income taxes. Significant components of the Company’s deferred tax assets consist of the following as of March 31:

	(In thousands)
Deferred Tax Assets	2024			2023
Allowance for credit losses not currently deductible    for tax purposes	$	-		$	4,538
Unrealized fair value adjustment		4,162			-
Share-based compensation		30			20
Federal and state net operating loss carryforwards		9,816			4,812
Right of use liability		15			43
Other items		50			87
Valuation allowance		(14,047	)		(9,457	)
Total deferred tax assets		26			43
Deferred tax liabilities
Right of use asset		15			43
Other items		11			-
Total deferred tax liabilities		26			43
Deferred income taxes	$	-		$	-

Income tax expense reflects an effective U.S. tax rate, which differs from the corporate tax rate for the following reasons:

	(In thousands)
	2024			2023
Income tax benefit at Federal statutory rate	$	(4,355	)	$	(6,838	)
Increase (decrease) resulting from:
Change in valuation allowance		4,590			9,457
State income taxes, net of Federal benefit		(770	)		(1,207	)
Other		535			5
Income tax expense	$	-		$	1,417

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of negative evidence evaluated was the cumulative pre-tax loss over the three-year period ended March 31, 2024. As of March 31, 2024, a full valuation allowance was recorded against the Company’s net deferred tax asset. The federal net operating loss ("NOL") generated for the year ended March 31, 2024 will carryforward indefinitely. Generally, state NOLs begin to expire March 31, 2039.

The Company considers the earnings of the Company’s U.S. subsidiaries to be indefinitely invested outside Canada on the basis of estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and the Company’s specific plans for reinvestment of those subsidiary earnings. The Company has not recorded a deferred tax liability related to the Canadian income taxes and U.S. withholding taxes on approximately $100.4 million of undistributed earnings of the U.S. subsidiaries indefinitely invested outside Canada. When the Company repatriates the U.S. earnings, it would need to adjust its income tax provision as the earnings will no longer be indefinitely invested outside of Canada. If the Company decided to repatriate the U.S. earnings, it would need to adjust its income tax provision in the period the Company determined that the earnings will no longer be indefinitely invested outside of Canada.