6. INCOME TAXES

6 Months Ended

Sep. 30, 2022

INCOME TAXES

NOTE 6 - INCOME TAXES

NOTE 6—INCOME TAXES

The current portion and long-term portion of the Company’s income tax liability related to unrecognized tax benefits was $0 at both September 30, 2022 and March 31, 2022. As of September 30, 2022, $3.6 million of unrecognized tax benefits had been recorded as a reduction to net deferred tax assets. Due to historical losses in the U.S., the Company has a full valuation allowance on its U.S. federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance.

Management believes that within the next twelve months the Company will not have a significant reduction in uncertain tax benefits, including interest and penalties, related to positions taken with respect to credits and loss carryforwards on previously filed tax returns.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes in the Condensed Consolidated Statements of Operations.

The Company is subject to taxation in the United States and various state and foreign jurisdictions.  Fiscal years 2013 through 2022 remain open to examination by federal tax authorities, and fiscal years 2012 through 2022 remain open to examination by California tax authorities. Fiscal years 2020, 2021 and 2022 are subject to audit by the Israeli tax authorities.

For the six months ended September 30, 2022 and September 30, 2021, the Company incurred income tax expense (benefit) of $97,000 and ($130,000) on net losses before income taxes of ($7.1 million) and ($8.9 million), respectively. The provision (benefit) was calculated using the annualized effective tax rate method. The Company’s estimated annual effective income tax rate, including discrete items, was approximately (1.69%) and 0.49% as of September 30, 2022 and 2021, respectively. The annual effective tax rates as of September 30, 2022 and 2021 vary from the United States statutory income tax rate primarily due to valuation allowances in the United States, whereby pre-tax losses do not result in the recognition of corresponding income tax benefits and expenses and the foreign tax differential.