Cineverse Corp. Income Taxes Disclosure

9. INCOME TAXES

We recorded income tax expense (benefit) of ($2.8) million and $106 thousand from operations for the years ended March 31, 2026 and 2025, respectively. For the year ended March 31, 2026, we recorded an income tax (benefit) of ($2.8) million, which represented a ($2.8) million release of our valuation allowance related to the IndiCue acquisition, a ($75) thousand deferred tax (benefit) related to changes in the Indian deferred tax asset, net of $25 thousand of current U.S. state income taxes and $43 thousand of current Indian income taxes.

In connection with the acquisition of IndiCue, during the year ended March 31, 2026, we recorded identifiable intangible assets for financial reporting purposes for which there was no corresponding step-up in tax basis because the transaction was treated as a stock acquisition for income tax purposes. As a result, we recognized an acquisition-date deferred tax liability of approximately $2.8 million related to the book-over-tax basis differences in the acquired intangible assets. The deferred tax liability represented a source of future taxable income and supported the realizability of an equivalent amount of our existing deferred tax assets. Accordingly, we reduced our valuation allowance by approximately $2.8 million and recognized a corresponding deferred income tax benefit in the consolidated statement of operations for the year ended March 31, 2026. We continue to maintain a valuation allowance against deferred tax assets that are not supported by sufficient positive evidence of realizability.

In July 2025, the One Big Beautiful Bill Act (Public Law 119-21) was enacted. We recognized the income tax effects of the legislation in the period of enactment in accordance with ASC 740. The legislation did not have a material impact on our consolidated financial statements for the year ended March 31, 2026. We will continue to evaluate the impact of the legislation on future periods.

Income taxes paid (net of refunds received) related to continuing operations are presented on a cash basis and reconcile to cash paid for income taxes in the consolidated statement of cash flows. Income taxes paid (net of refunds received) were as follows (in thousands):

We have provided a valuation allowance to our net deferred tax assets as of March 31, 2026 and 2025. We are required to recognize all or a portion of our deferred tax assets if we believe that it is more likely than not that such assets will be realized, given the weight of all available evidence. We assess the realizability of the deferred tax assets at each interim and annual balance sheet date. In assessing the need for a valuation allowance, we considered both positive and negative evidence, including recent financial performance, projections of future taxable income and scheduled reversals of deferred tax liabilities.

For the year ended March 31, 2026, our valuation allowance increased by $214 thousand, related to the U.S. federal and state jurisdictions in the amounts of ($113) thousand and $327 thousand, respectively. For the year ended March 31, 2025, our valuation allowance (decreased) by ($10.5) million, related to the U.S. federal and state jurisdictions in the amounts of ($1.7) million and ($8.9) million, respectively. The increase in our valuation allowance during the fiscal year ended March 31, 2026 was mainly due to an increase to our net operating loss carryforward and other deferred tax assets, net of a decrease related to the recording of a deferred tax liability related to the IndiCue acquisition. The decrease in our valuation allowance during the fiscal year ended March 31, 2025 was mainly due to a change in our blended state statutory tax rate. The state statutory tax rate decreased due to the utilization of the census-method for purposes of apportioning revenue. This change caused our gross state deferred tax asset to decrease along with the corresponding valuation allowance.

As of March 31, 2026, we had federal and state net operating loss carryforwards of approximately $80.5 million available in the United States of America (“U.S.”) to reduce future taxable income. U.S. federal and state net operating loss carryforwards of approximately $19.2 and $81.7 million, respectively, generally begin to expire in 2027. U.S. federal net operating loss carryforwards that were generated during the years ended March 31, 2020, 2021, 2022, 2023, 2024, and 2026 of approximately $61.3 million, do not expire.

Under Section 382 of the Internal Revenue Code, if a corporation undergoes an ownership change (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss (“NOL”) carryforwards to offset its post-change income may be limited. Similar rules may apply under state tax laws. On November 1, 2017, we experienced an ownership change with

respect to the Bison acquisition. Accordingly, our ability to utilize our NOL carryforwards attributable to periods prior to November 1, 2017, is subject to substantial limitations. These limitations could result in increased future tax payments, which could be material. We experienced subsequent ownership changes under Section 382 on September 15, 2020 and November 1, 2022, which resulted in additional limitations in our ability to utilize our NOL carryforwards attributable to periods prior to September 15, 2020 and November 2022, respectively. The limitations triggered by the September 15, 2020 and November 1, 2022 ownership changes were significantly less substantial than the limitation triggered by the November 1, 2017 ownership change, however.

We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and India. For federal income tax purposes, our fiscal 2023 through 2026 tax years remain open for examination by the tax authorities under the normal three-year statute of limitations. Fiscal 2007 is also open for examination as we used the fiscal 2007 NOL carryforward to offset taxable income generated in fiscal 2025. For U.S. state tax purposes, our fiscal 2022 through 2026 tax years generally remain open for examination by most of the tax authorities under a four-year statute of limitations. For Indian income tax purposes, our fiscal 2023 through 2026 tax years remain open for examination by the tax authorities.

We evaluated the provisions of ASC 740-10 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that a company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10.

We recorded an unrecognized tax benefit liability of approximately $49 thousand as of March 31, 2026, related to potential state income tax liabilities arising from non-filing positions in connection with our acquisition of IndiCue. We recognize interest and penalties on uncertain tax positions as a component of income tax expense. As of March 31, 2025, no liability for unrecognized tax benefits was required to be reported.