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Note 13 - Income Taxes
 12 Months Ended
Sep. 30, 2022
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

13. INCOME TAXES

 

Income taxes consisted of the following:

 

   

Years ended September 30,

  
   

2022

    

2021

  

Current tax provision

                

Federal

   $ -     $ -  

State

     3       1  

Foreign

     70       -  

Total current tax provision

     73       1  

Deferred provision

                

Federal

     568       368  

State

     100       65  

Total deferred provision

     668       433  

Provision for income taxes

   $ 741     $ 434  

 

A reconciliation of income taxes at the federal statutory rate of 21% to the effective tax rate was as follows:

 

   

Years ended September 30,

  
   

2022

    

2021

  
                 

Income taxes computed at the federal statutory rate

   $ (3,314 )   $ 239  

Change in valuation allowance

     1,065       435  

Nondeductible compensation, interest expense and other

     4,101       57  

State income taxes, net of federal tax benefit

     (859 )     210  

Change in R&D credit carryover

     (186 )     19  

Stock options and other prior year true-ups

     25       (175 )

Foreign rate differential

     (1 )     (117 )

State business credit utilization

     (90 )     (234 )

Provision (benefit) for income taxes

   $ 741     $ 434  

 

The types of temporary differences between the tax basis of assets and liabilities and their approximate tax effects that give rise to a significant portion of the net deferred tax asset as of September 30, 2022 and 2021 were as follows:

 

   

At September 30,

  
   

2022

    

2021

  

Deferred tax assets

                

Net operating loss carryforwards

   $ 10,054     $ 11,769  

Research and development credit

     4,712       5,479  

Share-based compensation

     688       538  

Patents

     2,331       8  

Accruals and other

     2,245       2,487  

Allowances

     280       237  

Gross deferred tax assets

     20,310       20,518  

Deferred tax liabilities

                

Equipment

     (313 )     (352 )

Operating ROU assets

     (1,066 )     (1,222 )

Acquired intangible assets

     (2,180 )     (2,592 )

Gross deferred tax liabilities

     (3,559 )     (4,166 )

Less valuation allowance

     (9,378 )     (8,313 )

Net deferred tax assets and liabilities

   $ 7,373     $ 8,039  

 

As of September 30, 2022, the Company had net deferred tax assets of approximately $7,373. The deferred tax assets are primarily composed of federal and state NOL carryforwards and federal and state research and development (“R&D”) credit carryforwards. As of September 30, 2022, the Company had federal NOL carryforwards of approximately $32,817, which expire from 2024 through 2037, except for $1,262 that have an indefinite carryforward period. The Company also has an estimated $2,500 and $119 of federal and state R&D tax credits, respectively, as of September 30, 2022, a portion of which will begin to expire in the current tax year.

 

The Company reviews its ability to realize its deferred tax assets on a quarterly basis. In doing so, management considers historical and projected taxable income of the Company, along with any tax planning strategies and any other positive or negative evidence. Realization is dependent on generating sufficient taxable income prior to the expiration of the loss carryforwards and other deferred assets. The Company expects to utilize the deferred tax asset in the future, except for those related to federal R&D tax credit carryforwards and net operating loss carryforwards, R&D credits and foreign tax credits related to Genasys Spain continues to maintain a partial allowance of $9,378. Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

 

 

As of September 30, 2022, the Company had no unrecognized tax benefits. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

 

The Company is subject to taxation in the U.S. and various state jurisdictions. All of the Company’s historical tax years are subject to examination by the Internal Revenue Service and various state jurisdictions due to the generation of NOL and credit carryforwards.