9.  Income Taxes

The Company had federal and state net operating loss carryforwards of approximately $90.0 million and $55.3 million at March 31, 2017 and 2016, respectively, expiring in varying amounts from 2019 through 2037.  

The Company has deferred tax assets of approximately $33.9 million and $20.5 million relating to these net operating loss carryforwards at March 31, 2017 and 2016, respectively. Federal net operating loss carryforwards may be subject to limitations as a result of the change in ownership (see Note 1) as defined under Internal Revenue Code Section 382. State net operating loss carryforwards are subject to limitations which differ from federal law in that they may not allow the carryback of net operating losses, and have shorter carryforward periods.

ASC Topic 740, Income Taxes, requires that a valuation allowance be recorded to reduce deferred tax assets when it is more likely than not that the tax benefit of the deferred tax assets will not be realized. The evaluation includes the consideration of all available evidence, both positive and negative, regarding historical operating results including recent years with reported losses, the estimated timing of future reversals of existing taxable temporary differences, estimated future taxable income exclusive of reversing temporary differences and carryforwards, and potential tax planning strategies which may be employed to prevent an operating loss or tax credit carryforward from expiring unused. In situations where a three-year cumulative loss condition exists, accounting standards require management to evaluate its ability to consider projections of future results as positive evidence to assess the realizability of deferred tax assets.  As of March 31, 2017, the Company’s financial results reflected a three-year cumulative loss. The three-year cumulative loss constitutes significant negative evidence, limiting the Company’s ability to consider other positive evidence, such as the Company’s projections for future growth. Consequently, for the year ended March 31, 2017, the Company recorded a non-cash charge of $6.5 million primarily as a result of an adjustment to the valuation allowance against substantially all of its deferred tax assets. This valuation allowance has no effect on the Company’s ability to utilize the deferred tax assets to offset future taxable income, if generated. As required by US GAAP, the Company will continue to assess the likelihood that the deferred tax assets will be realizable in the future and the valuation allowance will be adjusted accordingly. The tax benefits relating to any reversal of the valuation allowance on the net deferred tax assets in a future period will be recognized as a reduction of future income tax expense in that period. 

Net deferred tax assets and liabilities consist of the following as of March 31, 2017 and 2016 (in thousands):  





The components of the income tax expense for the years ended March 31, 2017 and 2016 are as follows (in thousands):









The differences between the United States federal statutory tax rate and the Company's effective tax rate for the years ended March 31, 2017 and 2016 are as follows (in thousands):