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Income Taxes
 12 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
Income Taxes

Note 7       Income Taxes

 

The Company’s U.S. and foreign loss before income taxes are set forth below:

 

          
   2021  2020
United States  $(28,850,926)  $(18,096,148)
Foreign   (8,790,143)   (8,161,658)
Total  $(37,641,069)  $(26,257,806)

 

The components of net deferred income tax assets as of September 30, 2021 and 2020 are as follows:

 

          
   2021  2020
Net operating loss carryforwards  $34,982,000   $23,397,000 
Research and development tax credit carryforwards   1,577,000    2,069,000 
Stock-based compensation   10,453,000    8,283,000 
Unpaid charges   89,000    83,000 
Intangible asset costs   323,000    132,000 
Foreign exchange and other   62,000    27,000 
Valuation allowance deferred tax assets   (47,486,000)   (33,991,000)
Net deferred tax assets  $—   $— 

 

 

                 
    2021   2020
Income tax benefit at statutory federal rate   $ (7,934,000 )   $ (5,519,000 )
Foreign income taxed at other rates     (353,000 )     (723,000 )
Permanent differences relating to stock based compensation       (4,379,000 )       —  
Permanent differences relating to Section 162(m)       816,000        —  
Other permanent differences     741,000     35,000  
Adjustment to tax assets based on Section 382     3,330,000       —  
Research and development credits, net     1,042,000       1,267,000  
State and local taxes     (7,022,000 )     (2,911,000 )
Adjustment and true up to prior years' tax provision     48,000     373,000  
Effect of change in statutory rates     216,000       36,000  
State minimum and exise taxes     267,565       22,664  
Change in valuation allowances     13,495,000       7,442,000  
Income tax expense   $ 267,565     $ 22,664  

 

As of September 30, 2021, the Company had U.S. federal net operating loss carryforwards of approximately $101.6 million (2020: $77.0 million) of which $37.7 will begin to expire in 2025 and $63.9 can be carried forward indefinitely, state and local net operating loss carryforwards of approximately $177.7 million (2020: $103.1 million) which will begin to expire in 2036, and Research and Development tax credits of $1.6 million (2020: $2.1 million) which will begin to expire in 2029. The Company had approximately $7.9 million (approximately AU$ 11.2 million) (2020: $4.3 million) of net operating loss carryforwards in Australia, which have an indefinite life, available to offset future taxable income in those jurisdictions.

 

The Company evaluates its valuation allowance requirements based on available evidence. When circumstances change, and this causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income. Because management of the Company does not currently believe that it is more likely than not that the Company will receive the benefit of these assets, a valuation allowance has been established at September 30, 2021 and 2020.

 

Uncertain Tax Positions

 

The Company files income tax returns in the U.S. federal jurisdiction and various state and local and foreign jurisdictions. The Company’s tax returns are subject to tax examinations by U.S. federal and state tax authorities, or examinations by foreign tax authorities until the respective statutes of limitation expire. The Company is subject to tax examinations by tax authorities for all taxation years commencing on or after 2014.

 

Under the provisions of the Internal Revenue Code, the net operating loss (“NOL”) carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Under Section 382 of the Internal Revenue Code, NOL and tax credit carryforwards may become subject to an annual limitation in the event of an over 50% cumulative change in the ownership interest of significant stockholders over a three-year, as well as similar state tax provisions.

 

The Company conducted a Section 382 study during the year ended September 30, 2021 and determined that, during the year ended September 30, 2015, there was a change in ownership which resulted in $25.8 million of federal NOLs being subject to an annual limitation. During the year ended September 30, 2021, the Company reduced its federal NOLs by $12.1 million and its Research and development tax credit carryforwards by $0.8 million, which are the amount of tax assets that will expire unutilized pursuant to the Section 382 study. This resulted in a reduction of $2.5 million of NOLs and $0.8 million of research and development credits and a corresponding reduction in the valuation allowance of $3.3 million, which was recorded in the current fiscal year. Subsequent ownership changes in future years could trigger additional limitations of the Company’s NOLs.

 

As of September 30, 2021, the Company did not provide any foreign withholding taxes related to its foreign subsidiaries’ undistributed earnings, as such earnings have been retained and are intended to be indefinitely reinvested to fund ongoing operations of the foreign subsidiaries. It is not practicable to estimate the amount of taxes that would be payable upon remittance of these earnings, because such tax, if any, is dependent upon circumstances existing if and when remittance occur.