v3.26.1
Income Taxes
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
(9) Income Taxes
All income before provision for income taxes is domestic.
The components of the income tax provision consist of the following (in thousands):
Year Ended March 31,
202620252024
Current taxes
Federal$— $343 $490 
State14 93 408 
Total current income tax provision
14 436 898 
Deferred income tax provision (benefit)
Federal(45)4,448 412 
State(42)800 (119)
Total deferred taxes(87)5,248 293 
Total income tax provision
$(73)$5,684 $1,191 
We adopted ASU 2023-09 on a prospective basis in fiscal year 2026. The reconciliation of income tax provision computed at the U.S. federal statutory tax rates to income tax expense is as follows (in thousands):
Year Ended March 31, 2026
$
%
US federal statutory income tax rate(12,046)21.00 %
Domestic federal
Nontaxable and nondeductible items
Stock-based compensation203 (0.35)%
Executive Compensation103 (0.18)%
Goodwill Impairment5,598 (9.76)%
Other(77)0.14 %
Excess tax benefits on share-based payments(1)— %
Changes in valuation allowances6,169 (10.76)%
Domestic state and local income taxes, net of federal effect(22)0.04 %
Total$(73)0.13 %
The differences between the effective income tax rate and the statutory U.S. federal income tax rate are as follows:
Year Ended March 31,
20252024
Federal rate on income before taxes21.0 %21.0 %
State income taxes, net of federal tax benefit45.0 %(4.9)%
Non-deductible executive compensation301.7 %(28.2)%
Other permanent differences9.5 %(1.7)%
Restricted stock shortfall adjustment(63.5)%(4.4)%
Deferred tax adjustments(62.9)%(0.8)%
Taxes payable adjustments(61.9)%— %
Valuation allowance(1155.2)%— %
Other(2.0)%— %
Total effective tax rate(968.3)%(19.0)%
In fiscal 2026, state and local income taxes in Florida comprise of the majority of the state and local income taxes, net of federal effect category. In 2025, state and local income taxes in Florida comprise the majority of the state and local income taxes, net of federal effect category.
On July 4, 2025, the “One Big Beautiful Bill Act”, or “OBBBA,” was signed into law, which represents the enactment date under U.S. GAAP. Key corporate tax provisions include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to Section 163(j) interest limitations, updates to Global Intangible Low-Taxed Income (“GILTI”), and Foreign-Derived Intangible Income (“FDII”) rules, amendments to energy credits, and expanded Section 162(m) aggregation requirements.
In accordance with ASC 740, the effects of the new tax legislation are recognized in the period of enactment. Management has evaluated the provisions of the OBBBA, recalculated temporary differences, reassessed valuation allowances, and considered any necessary adjustments. Based on this evaluation, management concluded that the effects of the OBBBA are not material to the Company’s consolidated financial statements for the twelve months ended March 31, 2026. Management will continue to monitor forthcoming guidance, interpretations, and technical clarifications to assess whether any future adjustments or additional disclosures may be required.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities are as follows (in thousands):
March 31,
20262025
Deferred tax assets:
Accrued sales tax liability
$4,645 $5,101 
Other accrued expenses
101 200 
Deferred stock compensation126 425 
Bad debt reserves and inventory write-downs902 227 
Capitalized research and development costs
3,942 3,201 
Lease liabilities
136 250 
    Net operating loss carryforward9,280 3,431 
Total deferred tax assets19,132 12,835 
Deferred tax liabilities:
Tax accounting method change
(178)(349)
Intangible assets
(1,307)(1,921)
Property and equipment
(2,606)(3,181)
Right of use assets
(131)(242)
Total deferred tax liabilities
(4,222)(5,693)
Valuation allowance(15,085)(7,405)
Total net deferred tax (liability) asset $(175)$(263)
The Company has evaluated the positive and negative evidence bearing upon the realizability of its net deferred tax assets, which are composed primarily of net operating losses and capitalized research and development costs. Management has considered the Company’s cumulative net losses in recent years and limited evidence of sustainable taxable income in future periods, and concluded that it is more likely than not that the Company will not recognize the benefits of deferred tax assets. As a result, a full valuation allowance has been established against the Company’s net deferred tax assets as of March 31, 2026. As of March 31, 2026, the Company recorded a deferred tax liability of $175 thousand, primarily attributable to acquired indefinite-lived intangibles with no corresponding tax basis. For accounting purposes, the intangible assets will not be amortized and subject to impairment review and testing. A portion of these deferred tax liabilities are not available as a source of income to support the realization of deferred tax assets because they are not expected to reverse in the same period as deferred tax assets. As a result, the Company has recorded a deferred tax liability for the portion of the liability that cannot be offset with indefinite lived deferred tax assets. Management reevaluates the positive and negative evidence at each reporting period. The valuation allowance increased by $7.7 million in fiscal year 2026 as compared to fiscal year 2025.
The provisions of FASB ASC 740-10-25-5 prescribe the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Additionally, FASB ASC 740-10-25-5 provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Under FASB ASC 740-10-25-5, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued are reflected as a reduction of the overall income tax provision. As of March 31, 2026 and 2025, we did not have any uncertain tax positions.
At March 31, 2026, the Company had $36.0 million of federal net operating loss carryforwards some of which begin to expire in fiscal 2027. The Company also had $33.4 million in state net operating loss
carryforwards which begin to expire in fiscal 2027. In fiscal 2024 the Company acquired PetCareRx, a loss corporation. The tax attributes acquired are subject to Internal Revenue Code Section 382 which limits the utilization annually. Outlined below are the tax attribute balances remaining as of March 31, 2026 (in thousands).
PetCareRx Tax Attributes AcquiredTotalSec. 382 limited utilizationAttributes for which a deferred tax asset is recordedExpiration
Federal net operating losses - limited carryover$85,454 $83,300 $2,154  Beginning in FY 2024
Federal net operating losses - unlimited carryover$10,501 $— $10,501  None
Disallowed business interest expense carryover$1,855 $— $1,855  None
State net operating losses$11,040 $2,066 $8,974  Beginning in FY 2026
Tax Attributes as of March 31, 2025TotalSec. 382 limited utilizationAttributes for which a deferred tax asset is recordedExpiration
Federal net operating losses - limited carryover$77,052 $76,238 $814  Beginning in FY 2026
Federal net operating losses - unlimited carryover$12,739 $— $12,739  None
Disallowed business interest expense carryover$— $— $—  None
State net operating losses$11,884 $832 $11,052  Beginning in FY 2026
Tax Attributes as of March 31, 2026TotalSec. 382 limited utilizationAttributes for which a deferred tax asset is recordedExpiration
Federal net operating losses - limited carryover$73,357 $72,543 $814 Beginning in FY 2027
Federal net operating losses - unlimited carryover$35,213 $— $35,213 None
Disallowed business interest expense carryover$— $— $— None
State net operating losses$34,279 $832 $33,447 Beginning in FY 2027
A summary of income taxes paid, net of refunds received is as follows (in thousands):
Year Ended
March 31, 2026
US federal$— 
US state and local
Arizona3 
California(24)
Idaho(28)
Indiana(5)
New York8 
Oklahoma(6)
Tennessee4 
Texas84 
Other16 
Income taxes, net of amounts refunded$52