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INCOME TAXES
 12 Months Ended
Mar. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Loss from continuing operations before income taxes as shown in the Consolidated Statements of Income (Loss) consists of the following:
Year Ended March 31,
20252024
Domestic$(4,791)$(3,468)
Foreign(197)(487)
Total$(4,988)$(3,955)
Income tax expense (benefit) attributable to pretax loss from continuing operations consists of (in thousands):
Year Ended March 31,
20252024
Current:
Federal$— $23 
State166 (226)
Foreign557 902 
Total current723 699 
Deferred:
Federal83 126 
State(17)(13)
Foreign(366)(83)
Total deferred(300)30 
Total$423 $729 


Income tax expense attributable to pretax loss from continuing operations differed from the amounts computed by applying the U.S. Federal income tax rate of 21.0% to pretax loss from continuing operations as follows (in thousands):
Year Ended March 31,
20252024
Expected Federal income tax benefit U.S. statutory rate$(1,048)21.0 %$(831)21.0 %
Foreign rate differential(101)2.0 %399 -10.1 %
State income taxes, net of federal benefit(165)3.3 %(125)3.2 %
Micro-captive insurance benefit— 0.0 %(306)7.7 %
Change in valuation allowance1,272 -25.5 %1,909 -48.3 %
Income attributable to minority interest - Contrail(140)2.8 %(217)5.5 %
Other differences, net605 -12.1 %(100)2.5 %
Income tax expense$423 -8.5 %$729 -18.5 %


The Company did not record any liabilities for uncertain tax positions for the fiscal years ended March 31, 2025 and March 31, 2024.

The Tax Cuts and Jobs Act (the "Tax Act") provides for a territorial tax system, that includes the global intangible low-taxed income (“GILTI”) provision beginning in 2018. The GILTI provisions require us to include in our U.S. income tax return certain current year foreign subsidiary earnings net of foreign tax credits, subject to limitation. We elected to account for the GILTI tax in the period in which it is incurred. There was no GILTI inclusion for the fiscal years ended March 31, 2025 and March 31, 2024.

The Company (exclusive of Delphax which has a full valuation allowance) has federal gross operating losses of $11.3 million and state gross operating losses of $15.7 million, and foreign gross operating losses of $7.6 million at March 31, 2025. These net operating losses will begin to expire in tax year 2031. The Company has foreign tax credits of $0.5 million that will begin to expire in tax year 2029.

Deferred tax assets and liabilities were comprised of the following (in thousands):
Year Ended March 31,
20252024
Net operating loss & attribute carryforwards$11,681 $9,414 
Unrealized losses on investments1,540 1,055 
Inventory reserve1,149 1,041 
Accrued vacation442 449 
Foreign tax credit520 650 
Lease liabilities3,463 2,913 
Research and development capitalizations441 275 
Other deferred tax assets792 517 
Total deferred tax assets20,028 16,314 
Property and equipment(1,651)(1,735)
Right-of-use assets(3,236)(2,703)
Capital gain deferment(1,793)(1,763)
Foreign intangible assets(1,830)(2,089)
Investment in partnerships(2,159)(105)
Other deferred tax liabilities(403)(393)
Total deferred tax liabilities(11,072)(8,788)
Net deferred tax assets8,956 7,526 
Less valuation allowance(11,103)(9,973)
Net deferred tax liabilities$(2,147)$(2,447)
The Company is not asserting indefinite reinvestment with regards to foreign earnings in the Netherlands. The Company has not recorded deferred taxes associated with these undistributed earnings as the impact of any future distribution will not have a material tax impact. The Company continues to assert that it will permanently reinvest all other foreign earnings, including basis differences of all the Company's foreign subsidiaries. As a result of its permanent reinvestment assertion, the Company has not recorded deferred taxes related to its foreign subsidiaries under the indefinite exception. The Company has not determined the deferred tax liability associated with these undistributed earnings and basis differences, as such determination is not practicable.
Valuation Allowance

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 objective negative evidence evaluated was the cumulative loss incurred over the three-year period ended March 31, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth.

On the basis of this evaluation, as of March 31, 2025, a valuation allowance of $11.1 million (inclusive of the Delphax entities’ valuation allowances that were discussed above) has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as our projections for growth.

The Organization for Economic Co-operation and Development ("OECD") has introduced a framework to implement a global minimum tax. Several jurisdictions in which the Company operates have enacted laws effective January 1, 2024, consistent with the OECD's framework. While details around the global minimum tax in each jurisdiction are uncertain, the Company has assessed the applicability of these rules and determined that it is not subject to the global minimum tax for the fiscal year ending March 31, 2025.
Delphax

Effective on November 24, 2015, Air T, Inc. purchased interests in Delphax. With an equity investment level by the Company of approximately 67%, Delphax is required to continue filing a separate United States corporate tax return.

Delphax maintains a September 30 fiscal year end, and the returns for the fiscal year ended September 30, 2024 have not been filed. The gross deferred tax balances related to Delphax includes federal and state loss carryforwards of $8.6 million and $1.7 million, respectively. The net operating losses expire in varying amounts beginning in the tax year 2027.

The provisions of ASC 740 require an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets will be recovered. In accounting for Delphax's tax attributes, the Company has established a full valuation allowance of $1.8 million as of March 31, 2025 and March 31, 2024. The cumulative tax losses incurred by Delphax in recent years was the primary basis for the Company’s determination that a full valuation allowance should be established against Delphax’s net deferred tax assets.