v3.26.1
Income Taxes
 12 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

Note 9. Income Taxes

The following table summarizes the (loss) income before income tax expense by jurisdiction for the period indicated (in thousands):

 

 

March 31,
2026

 

 

March 31,
2025

 

Pre-tax book income (loss)

 

 

 

 

 

Domestic

$

(13,841

)

 

$

(2,486

)

Foreign

 

—

 

 

 

—

 

Total

$

(13,841

)

 

$

(2,486

)

A reconciliation of the statutory federal rate and the effective rate, for operations, is as follows for the years ended March 31, 2026 and 2025 (in thousands, except percentages):

 

 

March 31,
2026

 

 

 

 

March 31,
2025

 

 

 

Income taxes (benefit) at statutory federal rate

$

(2,907

)

 

21.0

%

 

$

(522

)

 

21.0

%

State and local taxes, net of federal benefit (1)

 

(21

)

 

0.2

%

 

 

(31

)

 

1.2

%

 Tax credits

 

(179

)

 

1.3

%

 

 

(321

)

 

12.9

%

 Changes in valuation allowance

 

152

 

 

(1.1

)%

 

 

(141

)

 

5.7

%

Nontaxable or nondeductible items

 

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

568

 

 

(4.1

)%

 

 

—

 

 

0.0

%

 Stock-based compensation

 

55

 

 

(0.4

)%

 

 

75

 

 

(3.0

)%

Financing fees

 

156

 

 

(1.1

)%

 

 

—

 

 

0.0

%

Other

 

 

 

 

 

 

 

 

 

 Removal of federal net operating losses and research development credits

 

2,126

 

 

(15.4

)%

 

 

867

 

 

(34.9

)%

 Other true-ups

 

(7

)

 

0.0

%

 

 

(21

)

 

1.0

%

Changes in unrecognized tax benefits

 

59

 

 

(0.4

)%

 

 

96

 

 

(3.9

)%

Provision for income taxes

$

2

 

 

(0.0

)%

 

$

2

 

 

0.0

%

 

(1) State taxes in California comprise the majority (greater than 50%) of the tax effect in this category.

For the years ended March 31, 2026 and 2025, federal and state income tax payments were insignificant and therefore are not presented in disaggregated detail.

 

Deferred income taxes reflect the net tax effects 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 the Company’s net deferred tax assets are as follows as of March 31, 2026 and 2025 (in thousands, except percentages):

 

March 31,
2026

 

 

March 31,
2025

 

Deferred tax assets:

 

 

 

 

 

Amortization

$

861

 

 

$

1

 

Section 174 R&D capitalization

 

1,730

 

 

 

2,380

 

Accrued expenses and reserves

 

78

 

 

 

132

 

Operating lease liability

 

99

 

 

 

207

 

Stock-based compensation

 

342

 

 

 

336

 

Other, net

 

4

 

 

 

5

 

Total deferred tax assets

 

3,114

 

 

 

3,061

 

Valuation allowance

 

(2,997

)

 

 

(2,807

)

     Net deferred tax assets

$

117

 

 

$

254

 

Deferred tax liabilities:

 

 

 

 

 

Operating lease right-of-use assets

 

(90

)

 

 

(191

)

Depreciation

 

(27

)

 

 

(63

)

     Total deferred tax liabilities

$

(117

)

 

$

(254

)

 

$

—

 

 

$

—

 

 

A full valuation allowance has been established to offset the deferred tax assets as management cannot conclude that realization of such assets is more likely than not. Under the Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company's net operating loss and research tax credit carryforwards to offset taxable income may be limited based on cumulative changes in ownership. The Company has not completed an analysis to determine whether any such limitations have been triggered as of March 31, 2026. Until this analysis is completed, the Company has removed the deferred tax assets related to net operating losses from deferred tax asset schedule. Further, until a study is completed and any limitation known, approximately $1.8 million for each of the years ended March 31, 2026 and 2025, are being considered as an uncertain tax position netted against the deferred tax asset. Due to the existence of the valuation allowance, future changes in the Company’s unrecognized tax benefits will not impact its effective tax rate. Any carryforwards that will expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. The valuation allowance increased by approximately $190,000 and decreased by approximately $177,000 for the years ended March 31, 2026 and 2025, respectively.

 

Federal and State NOLs that have not been recognized as a DTA are $231.6 million and $43.9 million, respectively, as of March 31, 2026.

 

Federal net operating loss carryforwards ("NOLs") of approximately $88 million will carryforward indefinitely and be available to offset up to 80% of future taxable income each year. The remaining federal net operating losses will begin to expire in 2028, unless previously utilized. The state net operating loss carryforwards will begin to expire in 2028, unless previously utilized.

Federal and State research tax credit carryforwards that have not been recognized as a DTA are $5.5 million and $4.9 million at March 31, 2026, respectively. The federal research tax credit carryforwards begin to expire in 2028. The state research tax credit carryforwards do not expire.

The Company did not record any accruals for income tax accounting uncertainties for the year ended March 31, 2026.

The Company recognizes interest expense and penalties associated with uncertain tax positions as a component of income tax expense. Accruals for interest and penalties related to income tax matters were not material as of March 31, 2026.

The Company is subject to tax in the United States and California. As of March 31, 2026, the Company's tax years from inception are subject to examination by the tax authorities due to the generation of net operating losses. The Company is not currently under examination by any jurisdiction.