Note 5 - Income Taxes

12 Months Ended

Mar. 31, 2026

Notes to Financial Statements

Income Tax Disclosure [Text Block]

NOTE 5 — INCOME TAXES:

The Company accounts for uncertain tax positions in accordance with the provisions of ASC Topic 740, "Accounting for Income Taxes" ("ASC 740"). When uncertain tax positions exist, the Company will recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of March 31, 2026, the Company does not believe it has any uncertain tax positions.

Income taxes are recorded in accordance with ASC 740, which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. The Company determines its deferred tax assets and liabilities based on differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not some or all of the deferred tax assets will not be realized.

As of March 31, 2026, the Company had available net operating loss carryforwards to reduce federal and state income taxes of approximately $24.4 million and $25.5 million respectively. If not utilized, these carryforwards begin to expire in 2036. Of the federal net operating loss carryforwards at March 31, 2026, $24.4 million can be carried forward indefinitely. As of March 31, 2025, the Company had $2.2 million of foreign net operating loss carryforwards which do not expire.

Utilization of the net operating loss and tax credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that have occurred previously or that could occur in the future, as provided by Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, or Section 382, as well as similar state provisions and other provisions of the Code. Ownership changes may limit the amount of net operating losses and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, occurs when there is greater than 50% change in the ownership of stock among certain 5% shareholders over a three-year period.

The Company is taxed as a C corporation for federal income tax purposes. Income taxes for the Company are recorded in accordance with ASC 740, which provides for deferred taxes using an asset and liability approach. Income taxes have been calculated on a separate tax return basis.

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Company determined deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company recognized deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such a determination, the Company considers all positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and results of recent operations. If the Company determines that it would be able realize its deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) it determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority. 

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations. As of March 31,2026, there were no interest or penalties to be accrued for. 

Improvements to income tax disclosures

In December 2023, the financial, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The ASU enhances the transparency and decision usefulness of income tax disclosures by requiring additional disaggregation of information related to the effective tax rate reconciliation, income taxes paid and income tax expense and pretax income by jurisdiction. The Company adopted ASU 2023-09 on a prospective basis effective March 31,2026. Accordingly, the enhanced income tax disclosures are presented beginning in fiscal year 2026 and prior period disclosures have not been recast. The adoption of this guidance did not have an impact on the Company's consolidated results of operations, financial position or cash flows, as the amendments relate solely to disclosure requirements. 

The Company’s provision for income tax expense for fiscal 2026 and fiscal 2025 was as follows:

The income/(loss) from operations before tax expense (benefit) consisted of the following for the years ended March 31, 2026 and 2025:
	2026			2025
	(In thousands)
Pre-tax (loss)/income
Domestic	$	(4,964	)	$	(5,653	)
Foreign		664			925
Total pre-tax (loss)/income	$	(4,300	)	$	(4,728	)
The income tax provision consisted of the following for the years ended March 31, 2026 and 2025.
	2026			2025
	(In thousands)
Current:
U.S. Federal	$	—		$	3
U.S. State and local		—			—
Foreign		—			—
Total Current Expense		—			3
Deferred:
U.S. Federal		—			—
U.S. State and local		—			—
Foreign		—			—
Total Deferred Expense		—			—
Provision for income tax expense	$	—		$	3

The Company adopted ASU 2019-12 (Topic 740) Simplifying the Accounting for Income Taxes during fiscal 2025. In the table above, the income tax expense of $11,000 in fiscal 2026 and $8,000 in fiscal 2025, 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 2026 and fiscal 2025 is analyzed below:

A reconciliation of the provision for income to the amount computed by applying the 21% statutory U.S federal income tax rate to income before income taxes after the adoption of ASU 2023-09 as follows:
	As of March 31, 2026
		(In thousands)		(percentage)
U.S. Federal Statutory Tax Rate	$	(901	)	20.9%
State and Local Income Taxes, Net of Federal Income Tax Effect		—		0.0%
Foreign Tax Effects
Hong Kong
Foreign rate differential		(84	)	2.0%
Interest Income		(47	)	1.1%
Other		(12	)	0.3%
Change in valuation allowance		5		(0.1)%
Effect of Cross-Border Tax Laws
Global intangible low-taxed income (GILTI)		8		(0.2)%
SubPart F		121		(2.8)%
Changes in Valuation Allowances		910		(21.2)%
Nontaxable or Nondeductible Items
Other		—		0.0%
Effective Income Tax	$	—		0.0%
As previously disclosed for the years ended March 31, 2025 prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and federal statutory rate:
	As of March 31, 2025
		(In thousands)		(percentage)
Statutory provision	$	(991	)	20.9%
Foreign subsidiary		(118	)	3.0%
State taxes		(293	)	7.0%
Permanent differences		124		(3.0)%
Adjustment to prior year taxes		(355	)	8.0%
Valuation allowance		1,636		(34.6)%
Provision for income tax expense	$	3		0.0%

As of March 31, 2026 and March 31, 2025, the principal components of the Company's deferred tax assets are as follows:

	2026			2025
	(In thousands)
Deferred tax assets:
Accounts receivable reserves	$	22		$	327
Inventory		189			175
Accruals		12			10
Net operating loss and credit carry forwards		7,089			5,649
Total deferred tax assets:		7,312			6,161
Valuation allowance		(7,312	)		(6,161	)
Net deferred tax assets:	$	—		$	—

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. After consideration of all of the evidence, both positive and negative, the Company has recorded a full valuation allowance against its deferred tax assets at March 31, 2026 and 2025, as the Company's management has determined that it is more likely than not that these assets will not be realized. The increase in the valuation allowance relates to the net loss incurred by the Company. 

The Company has $24.4 million of U.S. federal net operating loss carry forwards (“NOLs”) and $25.5 million of state NOLs as of March 31, 2026 as follows:

	Federal NOL's		State NOL's
Loss Year (Fiscal)	Included in DTA (in millions)		Included in DTA (in millions)		Expiration Year (Fiscal)
2016	$	—	$	0.6		State 2036
2017	$	—	$	0.8		State 2037
2018	$	—	$	2.6		State 2038
2019	$	1.9	$	2.7		Federal indefinite/State 2039
2020	$	3.7	$	3.0		Federal indefinite/State 2040
2021	$	4.0	$	3.2		Federal indefinite/State 2041
2022	$	3.4	$	2.9		Federal indefinite/State 2042
2024	$	2.4	$	2.1		Federal indefinite/State 2044
2025	$	3.7	$	3.2		Federal indefinite/State 2045
2026	$	5.3	$	4.4		Federal indefinite/State 2046
Total	$	24.4	$	25.5

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 Company analyzed the future reasonability of recognizing its deferred tax assets at March 31, 2026. As a result, the Company concluded that a valuation allowance of approximately $7,312,000 would be recorded against the assets.

The net operating loss and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state taxing authorities. Net operating loss and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code, respectively, as well as similar state provisions and other provisions within the Internal Revenue Code. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. Interest and penalty charges, if any, related to unrecognized tax benefits will be classified as income tax expense in the accompanying statements of operations and comprehensive loss. As of March 31, 2026 and 2025, the Company had no accrued interest or penalties related to uncertain tax positions.

The Company is subject to examination and assessment by tax authorities in numerous jurisdictions. As of March 31, 2026, the Company’s open tax years for examination for U.S. federal tax are tax years ending March 31, 2022 and forward. The Company is not currently under examination by the Internal Revenue Service or any other jurisdictions for any tax years.

As of March 31, 2026 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 One Big Beautiful Bill ("OBBB") and 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 OBBB and the TCJA and the application of ASC 740 and its impact is reflected in the financial statements as of March 31, 2026.