XML 30 R14.htm IDEA: XBRL DOCUMENT v3.23.3
Income Taxes
 12 Months Ended
Sep. 30, 2023
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 (in thousands):

 

           
    2023   2022   2021
United States   $ (41,198 )   $ (40,002 )   $ (28,851 )
Foreign     (6,300 )     (7,618 )     (8,790 )
Total   $ (47,498 )   $ (47,620 )   $ (37,641 )

 

The components of net deferred income tax assets as of September 30, 2023, 2022 and 2021 are as follows (in thousands):

 

           
    2023   2022   2021
Net operating loss carryforwards   $ 46,462     $ 46,208     $ 34,982  
Research and development tax credit carryforwards     2,713       2,182       1,577  
Stock-based compensation     18,593       13,373       10,453  
Research and development capitalization     7,219       —       —  
Unpaid charges     1,559       894       89  
Intangible asset costs     593       388       323  
Foreign exchange and other     49       44       62  
Valuation allowance of deferred tax assets     (77,188 )     (63,089 )     (47,486 )
Net deferred tax assets   $ —     $ —     $ —  

  

A reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements for the years ended September 30, 2023, 2022 and 2021 is as follows (in thousands):

 

           
    2023   2022   2021
Income tax benefit at statutory federal rate   $ (9,975 )   $ (10,000 )   $ (7,934 )
Foreign income taxed at other rates     —       (170 )     (353 )
Permanent differences relating to stock based compensation     (601 )     (714 )     (4,379 )
Permanent differences relating to GILTI inclusion     165       —       —  
Permanent differences relating to Section 162(m)     —       —       816  
Other permanent differences     273       —       741  
Adjustment to tax assets based on Section 382     —       —       3,330  
Research and development credits, net     (37 )     232       1,042  
State and local taxes     (4,122 )     (4,975 )     (7,022 )
Adjustment to true up to prior years' tax provision     206       24       48  
Effect of change in statutory tax rates     —       —       216  
State minimum and excise taxes     —       358       268  
Change in valuation allowances     14,098       15,603       13,495  
Income tax expense   $ 7     $ 358     $ 268  

 

As of September 30, 2023, the Company had U.S. federal net operating loss carryforwards of approximately $126.3 million (2022: $123.4 million) of which $37.7 million will begin to expire in 2025 and $88.6 million can be carried forward indefinitely, state and local net operating loss carryforwards of approximately $ 16.6 million (2022: $17.2 million) which will begin to expire in 2036, and Research and Development tax credits of approximately $2.7 million (2022: $2.2 million) which will begin to expire in 2029. The Company had approximately $12.9 million (approximately AU$20.1 million) (2022: $10.6 million (approximately AU$ 14.9 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, 2023 and 2022.

 

The Tax Cuts and Jobs Act of 2017 (TCJA) has modified the IRC 174 expenses related to research and development for tax years beginning after December 31, 2021. Under the TCJA, the Company must now capitalize the expenditures related to research and development activities and amortize over five years for U.S. activities and 15 years for non-U.S. activities using a mid-year convention. Therefore, the capitalization of research and development costs in accordance with IRC 174 resulted in a gross deferred tax asset of $7.2 million.

 

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 2005.

 

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 period, 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 2021 fiscal year. Subsequent ownership changes in future years could trigger additional limitations of the Company’s NOLs. During the year ended September 30, 2023 and 2022 the Company determined that there were no changes in ownership pursuant to Section 382.

 

As of September 30, 2023, 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.