Income Taxes

12 Months Ended

Mar. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

8. INCOME TAXES

We recorded income tax expense of $0.1 million from operations and an income tax (benefit) of $(0.8) million for the years ended March 31, 2023 and 2022, respectively. For the year ended March 31, 2023, the income tax expense of $0.1 million was mainly related to foreign income taxes. The income tax (benefit) of $(0.8) million for the year ended March 31, 2022 was related to a $(0.9) million tax benefit release of the valuation allowance resulting from the acquisition of Foundation TV, offset by $0.1 million of state income taxes due to taxable income at the state level and timing differences related to fixed asset depreciation.

The following table presents the components of income tax expense (benefit) (in thousands):

	For the Fiscal Year Ended March 31,
	2023		2022
Federal:
Current	$	—	$	—
Deferred		—		(672	)
Total federal	$	—	$	(672	)
State:
Current	$	12	$	100
Deferred		—		(216	)
Total state	$	12	$	(116	)
Foreign:
Current	$	107	$	—
Deferred		—		—
Total foreign		107		—
Income tax expense (benefit)	$	119	$	(788	)

Net deferred taxes consisted of the following (in thousands):

	As of March 31,
	2023			2022
Deferred tax assets:
Net operating loss carryforwards	$	18,318		$	15,853
Stock-based compensation		3,246			2,391
Intangibles		4,800			5,247
Accrued liabilities		908			1,216
Allowance for doubtful accounts		—			865
Investments		4,344			3,797
Nondeductible interest expense		3,479			3,654
Other		750			326
Total deferred tax assets before valuation allowance		35,845			33,349
Less: Valuation allowance		(35,755	)		(33,212	)
Total deferred tax assets after valuation allowance	$	90		$	137
Deferred tax liabilities:
Depreciation and amortization	$	(90	)	$	(137	)
Total deferred tax liabilities		(90	)		(137	)
Net deferred tax	$	—		$	—

We have provided a valuation allowance equal to our net deferred tax assets as of March 31, 2023 and 2022. We are required to recognize all or a portion of our deferred tax assets if we believe that it is more likely than not that such assets will be realized, given the weight of all available evidence. We assess the realizability of the deferred tax assets at each interim and annual balance sheet date. In assessing the need for a valuation allowance, we considered both positive and negative evidence, including recent financial performance, projections of future taxable income and scheduled reversals of deferred tax liabilities. The net changes in the valuation allowance of $2.5 million and $2.2 million during the fiscal years ended March 31, 2023 and 2022, respectively, were mainly due to increases in

the deferred tax asset related to the net operating loss carryforward and other temporary differences. We will continue to assess the realizability of the deferred tax assets at each interim and annual balance sheet date based upon actual and forecasted operating results.

As of March 31, 2023, we had utilizable federal and state net operating loss carryforwards of approximately $63.7 million available in the United States of America (“U.S.”) to reduce future taxable income. U.S. federal and state net operating loss carryforwards of approximately $22.6 and $63.7 million, respectively, generally begin to expire in 2026. U.S. federal net operating loss carryforwards that were generated during the years ended March 31, 2020, 2021, 2022, and 2023 of approximately $41.1 million, do not expire.

Under the provisions of the Internal Revenue Code, certain substantial changes in our ownership may result in a limitation on the amount of net operating losses that may be utilized in future years. During the year ended March 31, 2018, approximately $233.5 million of our net operating losses became subject to limitation under Internal Revenue Code Section 382 in connection with the consummation in November 2017 of the transactions under the Stock Purchase Agreement with Bison. Approximately $209.0 million of our net operating losses became unusable because of the ownership change. Future significant ownership changes could cause a portion or all of our remaining net operating losses to expire before utilization.

On March 27, 2020, the CARES Act was signed into law. The Act contains several new or changed income tax provisions, including but not limited to the following: increased limitation threshold for determining deductible interest expense; class life changes to qualified improvements (in general, from 39 years to 15 years); and the ability to carry back net operating losses incurred from tax years 2018 through 2020 up to the five preceding tax years. The Company has evaluated the new tax provisions of the CARES Act and determined the impact to be either immaterial or not applicable.

The differences between the U.S. statutory federal tax rate and our effective tax rate are as follows:

	For the Year Ended March 31,
	2023			2022
Provision at the U.S. statutory federal tax rate		21.0	%		21.0	%
State income taxes, net of federal benefit		8.0	%		(83.7	)%
Change in valuation allowance		(27.8	)%		137.0	%
Non-deductible expenses		(8.3	)%		31.5	%
Executive officer compensation limitation – Section 162(m)		(2.0	)%		2.8	%
PPP loan forgiveness		—			(30.9	)%
Losses from non-consolidated entities		7.9	%		(131.1	)%
Other		(0.1	)%		0.2	%
Income tax benefit (expense)		(1.3	)%		(53.2	)%

We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and India. For federal income tax purposes, our fiscal 2020 through 2023 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations. For U.S. state tax purposes, our fiscal 2019 through 2023 tax years generally remain open for examination by most of the tax authorities under a four-year statute of limitations. For Indian income tax purposes, our fiscal 2022 and 2023 tax years remain open for examination by the tax authorities.