18. Income Taxes

Income (loss) before provision for income taxes consisted of the following for the years ended March 31, 2026 and 2025 (in thousands):

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The current income tax provision represents income taxes reported or expected to be reported on the Company's federal, state, and foreign income tax returns for the respective periods. The Company has recorded a full valuation allowance against its net deferred tax assets.

The components of the provision for income tax expense (benefit) are as follows for the years ended March 31, 2026 and 2025 (in thousands):

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Actual income tax expense differed from the amount computed by applying statutory corporate income tax rates to income from operations before income taxes. A reconciliation of income tax expense (benefit) to the U.S. federal statutory rate, presented in accordance with ASU 2023-09, follows (in thousands, except percentages):

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As previously disclosed for the year ended March 31, 2025, prior to the adoption of ASU 2023-09, the table below is a reconciliation of the components that caused the Company's income tax expense to differ from amounts computed by applying the U.S. federal statutory rate (in thousands, except percentages):

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Deferred Tax Assets and Liabilities

The Company’s deferred tax assets and liabilities consisted of the following at March 31, 2026 and 2025 (in thousands):

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On March 29, 2026, the Operating Subsidiary and the Company entered into a Preferred Unit Redemption Agreement with CDSS, providing for the full redemption of all outstanding Preferred Units. Following the redemption, as of March 31, 2026, the Operating Subsidiary, which was previously treated as a partnership, is treated as a disregarded entity for tax purposes as it is 100% owned by the Company. Prior to the redemption, the Company recorded an outside basis difference related to its investment in the Operating Subsidiary. Following the redemption, the Company directly owns the assets and liabilities of the Operating Subsidiary and is required to track the related inside book-to-tax basis differences. The deferred tax assets and liabilities presented as of March 31, 2026 reflect these inside book-to-tax basis differences.

Valuation Allowance

Due to the uncertainty surrounding the timing and realization of the benefits of the Company's favorable tax attributes in future income tax returns, the Company has established a full valuation allowance against its net deferred tax assets. The Company's return to profitability in Fiscal 2026, while a positive indicator, does not yet constitute sufficient positive evidence to overcome negative evidence considered in the valuation allowance assessment under ASC 740. The Company will continue to evaluate the realizability of its deferred tax assets each reporting period and will reduce the valuation allowance when, in management's judgment, it is more likely than not that some or all of the deferred tax assets will be realized. While the weight of positive evidence does not outweigh the negative evidence at the end of Fiscal 2026, the Company anticipates that a release of valuation allowance may be appropriate within the next 12 months. The change in the valuation allowance was as follows (in thousands):

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For fiscal 2025, the decrease in the valuation allowance of $153.1 million was primarily attributable to the impact of the Plan of Reorganization, which resulted in the elimination of pre-reorganization tax attributes, including NOL carryforwards that remained with Reorganized PrivateCo (CDSS). For fiscal 2026, the increase in valuation allowance of $23.8 million primarily reflects 100% of the Operating Subsidiary's inside book and tax basis differences and tax basis step up resulting from the redemption of the Company’s Preferred Units, recorded through APIC.

Net Operating Loss Carryforwards

The Company’s NOL carryforwards for federal and state income tax purposes at March 31, 2026, were as follows (in thousands):

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Federal NOL carryforwards generated after December 31, 2017 are carried forward indefinitely but are subject to an 80% limitation on taxable income in the year of utilization under the Tax Cuts and Jobs Act of 2017.

IRC Section 382 Limitations

Internal Revenue Code Section 382 (“Section 382”) limits the use of net operating loss (“NOL”) and tax credit carryforwards when changes occur in the capital stock ownership of the Company. Any annual limitation may result in the expiration of NOL and credits before utilization. If the Company experiences an ownership change, utilization of the NOL and carryforwards could be significantly reduced. The Company does not expect to utilize NOL and tax credit carryforwards in the near term; accordingly, any Section 382 limitation is not expected to have a material impact on the financial statements given the full valuation allowance currently in place.

Unrecognized Tax Benefits

ASC 740 clarifies the accounting for income taxes by prescribing a minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. ASC 740 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting for interim periods, disclosure and transition. Based on management's evaluation, there were unrecognized tax benefits primarily related to research and development credits as of March 31, 2026 and March 31, 2025.

A reconciliation of the beginning and ending amount of total gross unrecognized tax benefits is as follows (in thousands):

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Tax Return Jurisdictions and Open Years

The Company files income tax returns in the U.S. federal jurisdiction and various state, local, and foreign jurisdictions. The Company is generally subject to examination by taxing authorities for fiscal years ended March 31, 2023 through the present period, subject to applicable statute of limitations periods.

Income taxes paid, net of refunds received for the fiscal year ended March 31, 2026, are as follows in accordance with ASU 2023-09 (in thousands):

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