v3.25.2
Note 14 - Income Taxes
 12 Months Ended
Mar. 31, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

14.

INCOME TAXES

 

Income tax expense for the fiscal years ended March 31, 2025 and 2024 consisted of:

 

  

2025

  

2024

 
  

(in thousands)

 

Current:

        

Federal

 $—  $— 

State

  (8)  (7)

Total current expense

  (8)  (7)

Deferred:

        

Federal

  —   — 

State

  —   — 

Total deferred expense

  —   — 

Income tax expense

 $(8) $(7)

 

The following table reconciles the amount of income taxes computed at the federal tax rate of 21% for each of the fiscal years ended March 31, 2025 and 2024, to the amount reflected in the Company’s consolidated statements of operations for the fiscal years ended March 31, 2025 and 2024:

 

  

2025

  

2024

 
  

(in thousands)

 

Tax provision at federal statutory income tax rate

 $866  $1,457 

Stock-based compensation

  (30)  (44)

Increase in valuation allowance

  (814)  (1,404)

State and local income taxes, net of federal tax benefit

  (6)  (6)

Expired losses

  —   — 

Deferred tax true-up

  (11)  (25)

Other, net

  (13)  15 

Income tax expense

 $(8) $(7)

 

The tax effects of temporary differences related to various assets, liabilities and carry forwards that give rise to deferred tax assets and deferred tax liabilities as of March 31, 2025 and 2024 are as follows:

 

  

2025

  

2024

 
  

(in thousands)

 

Deferred tax assets:

        

Net operating loss carry forwards

 $5,054  $4,471 

Inventory

  107   213 

Compensation accrual

  83   109 

Tax credit carry forwards

  20   28 

Interest limitation

  433   268 

Operating lease right-of-use assets

  1,062   1,184 

Section 174 Costs

  246   223 

Other

  11   9 

Gross deferred tax assets

  7,016   6,505 

Less valuation allowance

  (5,208)  (4,394)

Net deferred tax assets

  1,808   2,111 
         

Deferred tax liabilities:

        

Operating lease obligations

  (1,058)  (1,186)

Depreciation and amortization

  (750)  (925)

Net deferred tax liabilities

  (1,808)  (2,111)

Net deferred tax assets (liabilities)

 $—  $— 

 

In assessing the valuation allowance for deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Ultimately, the realization of deferred tax assets will depend on the existence future taxable income during the periods. In making this assessment, management considers past operating results, the scheduled reversal of deferred tax liabilities, estimates of future taxable income and tax planning strategies.

 

As of March 31, 2025 and 2024, the Company has concluded that a valuation allowance was appropriate in light of the significant negative evidence, which was objective and verifiable and primarily due to the cumulative losses in recent years.

 

While the Company’s long-term financial outlook remains positive, the Company concluded that its ability to rely on its long-term outlook as to future taxable income was limited due to the relative weight of the negative evidence from its recent cumulative losses. The Company’s conclusion regarding the need for a valuation allowance against its deferred tax assets could change in the future based on improvements in operating performance, which may result in the full or partial reversal of the valuation allowance.

 

As of March 31, 2025, the Company has net operating loss carry forwards and tax credit carry forwards available to offset future federal income tax as follows:

 

Expires March 31,

 

Federal Net

Operating

Loss

  

State Net

Operating

Losses

  

Research and

Experimentation

Tax Credit

 
  

(in thousands)

 

2026

 $159  $—  $2 

2027

  2,665   —   — 

2028

  1,612   —   1 

Thereafter

  2,767   17,982   17 

Indefinite

  12,017   —   — 
  $19,220  $17,982  $20 

 

As of March 31, 2025, the Company has federal net operating loss carry forwards of $19,220,000, of which $7,203,000 of the losses carried forward were generated prior to the 2018 tax year and have a 20 year carry forward and are available to offset 100% of taxable income. The remaining $12,017,000 of the losses were generated in tax years 2018 or later, which have an unlimited carry forward and are limited to 80% of taxable income. At March 31, 2025, the Company had state tax net operating loss carry forwards available to offset future California state taxable income of $6,070,000. These carry forwards expire March 31, 2037 through 2045. As of March 31, 2025, the Company had state tax net operating loss carry forwards available to offset future Hawaii state taxable income of $10,959,000. These carry forwards expire March 31, 2030 through 2045. As of March 31, 2025, the Company had $953,000 of net operating loss carry forwards between the remaining states that it files in.

 

The following, in general, represents the open tax years and jurisdictions that the Company used in its evaluation of tax positions. The Company has unused net operating losses carried forward, which cause the statute to remain open up to the amount of unused loss with the statute not begin until the year in which they are used.

 

Open tax years ending March 31,

 

Jurisdiction

2022

-

2025

 

U.S. Federal

2022

-

2025

 

State of Hawaii

2021

-

2025

 

State of California