LiveOne, Inc. Income Taxes Disclosure

Note 18 — Income Tax Provision

 

The Company’s income tax provision can be affected by many factors, including the overall level of pre-tax income, the mix of pre-tax income generated across the various jurisdictions in which the Company operates, changes in tax laws and regulations in those jurisdictions, changes in valuation allowances on its deferred tax assets, tax planning strategies available to the Company, and other discrete items.

 

The components of pretax loss and income tax expense (benefit) are as follows (in thousands): 

 

		Year Ended March 31,
		2026				2025
Loss before income taxes:
Domestic		$	(21,223	)		$	(20,555	)
Foreign			-				-
Total loss before income taxes		$	(21,223	)		$	(20,555	)
The provision for income taxes consisted of the following:
Current
U.S. Federal		$	-			$	-
State			29				95
Foreign			-				-
Total Current			29				95
Deferred:
U.S. Federal			(1	)			(68	)
State			2				(212	)
Foreign			-				-
Total Deferred			1				(280	)
Total provision (benefit) for income taxes		$	30			$	(185	)

 

The differences between income taxes expected at U.S. statutory income tax rates and the income tax provision are as follows (in thousands):

 

		Year Ended March 31, 2026
Income taxes computed at Federal statutory rate		$	(4,457	)			21.00	%
State and local income taxes, net of federal income tax effect (a)			336				(1.58	)%
Valuation allowance			3,494				(16.46	)%
Other			657				(2.82	)%
Total provision for taxes		$	30				0.14	%
(a) State taxes in California make up the majority of the tax effect in this category

 

		Year Ended
		March 31, 2025
Income taxes computed at Federal statutory rate		$	(4,316	)
State tax — net of federal benefit			(778	)
Nondeductible expenses			364
Change in tax rates			136
Change in valuation allowance			4,058
Stock compensation			374
Other			(23	)
Total provision for income taxes		$	(185	)

 

At March 31, 2026, the Company had available federal and state net operating loss carryforwards to reduce future taxable income of approximately $168.9 million and $98.8 million, respectively. The federal and state net operating loss carryforwards begin to expire on various dates beginning in 2028. Of the $168.9 million of federal net operating loss carryforwards, $51.7 million was generated in tax years beginning before March 31, 2018 and is subject to the 20-year carryforward period (“pre-Tax Act losses”), the remaining $117.2 million (“post-Tax Act losses”) can be carried forward indefinitely but is subject to the 80% taxable income limitation.

 

During the fiscal year ended March 31, 2024, LiveOne completed the Spin-Out. As a result of the Spin-Out, PodcastOne ceased to be a member of the LiveOne's federal consolidated tax group and now files a separate federal income tax return.

 

Of the $168.9 million of federal net operating losses as of March 31, 2026, $14.1 million is attributable to Podcast One and may only be used to offset future taxable income of Podcast One on its separate federal tax return.

 

The Company obtained $133.9 million and $1.5 million of federal net operating loss and credit carryforwards, respectively, and $104.2 million and $1.7 million of state net operating loss and credit carryforwards, respectively, through the acquisition of Slacker, Inc. in December 2017. Utilization of these losses is limited by Section 382 and 383 of the Code in fiscal year end March 31, 2018 and each taxable year thereafter. The Company updated its 382 study during the year ended March 31, 2024 to determine the applicable limitations. Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize the appropriate deferred tax asset at that time. The Company has estimated a limitation of the federal and state NOL of $96.8 million and $80.6 million, respectively. It is possible that the utilization of these NOL carryforwards and tax credits may be further limited.

 

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by the federal and state jurisdictions where applicable. There are currently no pending income tax examinations. The Company’s tax years for 2018 and forward are subject to examination by the federal tax authorities and tax years for 2017 and forward are subject to examination by California tax authorities due to the carryforward of unutilized net operating losses. 

 

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of March 31, 2026 and 2025, the Company has not accrued interest or penalties related to uncertain tax positions.

 

Significant components of the Company’s deferred income tax assets and (liabilities) are as follows as of (in thousands):

 

		Year Ended March 31,
		2026				2025
Deferred tax assets:
Net operating loss carryforwards		$	42,160			$	37,055
Research and development			1,105				1,519
Accruals and reserves			3,073				2,551
Stock compensation			3,246				3,448
163 (j) interest expense carryforwards			775				795
Charitable contribution carryforward			5				-
Unrealized losses			533				-
Other			9				13
Gross deferred tax assets			50,906				45,381
Deferred tax liabilities:
Right of use asset			(59	)			(26	)
Property and equipment			(735	)			68
Intangible assets			450				359
Net deferred tax assets			50,562				45,782
Valuation allowance			(50,623	)			(45,842	)
Net deferred tax liability		$	(61	)		$	(60	)

 

As the ultimate realization of the potential benefits of a portion of the Company’s deferred tax assets is considered unlikely by management, the Company has offset the deferred tax assets attributable to those potential benefits through valuation allowances. Accordingly, the Company did not recognize any benefit from income taxes in the accompanying consolidated statements of operations to offset its pre-tax losses. The valuation allowance against deferred tax assets is $50.6 million and $45.8 million for the years ended March 31, 2026 and 2025, respectively. The valuation allowance increased by $4.8 million for the year ended March 31, 2026.

 

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted. The OBBBA makes significant tax law changes and modifications, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and the restoration of favorable tax treatment for certain business provisions, including allowing accelerated tax deductions for qualified property and equipment expenditures and the business interest expense limitation. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.