v3.25.2
Income Taxes
 12 Months Ended
Mar. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
We had no current or deferred federal and state income tax expense or benefit for the year ended March 31, 2025, because we generated net operating losses, and currently management does not believe it is more likely than not that the net operating losses will be realized.
Income tax expense (benefit) differed from the amounts computed by applying the statutory federal income tax rate of 21% to pretax income (loss) as a result of the following:
Year Ended March 31,
20252024
Computed expected tax benefit(21.00)%(21.00)%
State income taxes, net of federal benefit0.00 %0.00 %
Tax effect of warrant modifications0.00 %— %
Tax effect of research and development credits(4.29)%0.00 %
Tax effect of stock compensation1.03 %1.11 %
Tax effect of other non-deductible items0.18 %0.03 %
Expired net operating loss carryforwards0.29 %0.92 %
Change in valuation allowance (federal only)23.19 %18.45 %
All other0.60 %0.49 %
Income tax expense0.00 %0.00 %
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets are as follows (in thousands):
March 31,
20252024
Deferred tax assets:
Net operating loss carryovers$51,324 46,463 
Basis differences in property and equipment— — 
Research and development credit carryforwards6,875 — 
Stock based compensation3,041 2,962 
Operating lease Right-of-Use asset37 64 
Capitalized research and development costs15,087 10,188 
Deferred revenue632 460
Accruals and reserves709 404 
Total deferred tax assets77,705 60,541 
Valuation allowance(77,681)(60,521)
Total deferred tax assets net of valuation allowance24 20 
Deferred tax liabilities:
Intangibles(12)— 
Basis differences in property and equipment(12)(20)
Total deferred tax liabilities(24)(20)
Net deferred tax asset (liability)$— $— 

Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by $17.2 million and $1.3 million during the fiscal years ended March 31, 2025 and 2024, respectively.
As of March 31, 2025, we had U.S. federal net operating loss carryforwards of approximately $229.2 million. Federal net operating loss carryforwards of approximately $82.1 million generated through our fiscal year ended March 31, 2018 will expire in our fiscal years ending March 31, 2025 through March 31, 2038. Federal net operating loss carryforwards of approximately $147.1 million generated in fiscal years ending after March 31, 2018 will carry forward indefinitely, but are subject to an 80% taxable income limitation. As of March 31, 2025, we had state net operating loss carryforwards of approximately $66.6 million, which will expire in fiscal years ending in 2029 through 2045. We also have federal and state research and development tax credit carryforwards of approximately $7.6 million and $2.0 million, respectively. The federal tax credits will expire at various dates beginning with our fiscal year ending March 31, 2029, unless previously utilized. The state tax credits do not expire and will carry forward indefinitely until utilized.
The Tax Cuts and Jobs Act of 2017 (TCJA) made a significant change to Internal Revenue Code Section 174 that went into effect for taxable years beginning after December 31, 2021. The change eliminated the ability to currently deduct research and development costs. Instead, these costs must be capitalized and amortized. As a result, we capitalized research and development costs of approximately $38.1 million for tax purposes for the year ended March 31, 2025.
U.S. federal and state tax laws include substantial restrictions on the utilization of net operating loss carryforwards in the event of a change in a corporation's ownership. We have not performed a change in ownership analysis since our inception in 1998, and accordingly, some or all of our net operating loss carryforwards may not be available to offset future taxable income, if any.
We file income tax returns in the U.S. federal, and various U.S. state jurisdictions. We are subject to U.S. federal and state income tax examinations by tax authorities for tax years 2004 through 2025 due to net operating losses that are being carried forward for tax purposes, but we are not currently under examination by tax authorities in any jurisdiction.
Uncertain Tax Positions
Our unrecognized tax benefits at March 31, 2025 and 2024 relate entirely to research and development tax credits. The total amount of unrecognized tax benefits at March 31, 2025 and 2024 is $2.4 million and $4.9 million, respectively. If recognized, none of the unrecognized tax benefits would impact our effective tax rate. The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
Year Ended March 31,
20252024
Unrecognized benefit - beginning of period$4,931 $1,283 
Prior period position increases (decreases)(3,329)3,648 
Current period tax position increases797 — 
Unrecognized benefit - end of period$2,399 $4,931 
Our policy is to recognize interest and penalties related to income taxes as components of interest expense and other expense, respectively. We incurred no interest or penalties related to unrecognized tax benefits in the years ended March 31, 2025 or 2024. We do not anticipate any significant changes in our uncertain tax positions within twelve months of this reporting date.