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Income Taxes
 12 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

14. INCOME TAXES

Income taxes consisted of the following:

 

 

Years ended September 30,

 

 

2024

 

 

2023

 

Current tax provision

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

State

 

 

11

 

 

 

16

 

Foreign

 

 

109

 

 

 

11

 

Total current tax provision

 

 

120

 

 

 

27

 

Deferred provision

 

 

 

 

 

 

Federal

 

 

(390

)

 

 

6,266

 

State

 

 

(135

)

 

 

1,107

 

Total deferred provision

 

 

(525

)

 

 

7,373

 

Provision (benefit) for income taxes

 

$

(405

)

 

$

7,400

 

 

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

 

 

Years ended September 30,

 

 

2024

 

 

2023

 

Income taxes computed at the federal statutory rate

 

$

(6,744

)

 

$

(2,309

)

Change in valuation allowance

 

 

3,466

 

 

 

10,376

 

Nondeductible compensation, interest expense and other

 

 

956

 

 

 

232

 

State income taxes, net of federal tax benefit

 

 

(334

)

 

 

(605

)

Change in R&D credit carryover

 

 

(379

)

 

 

(433

)

NOL expirations and other prior year true-ups

 

 

3,051

 

 

 

111

 

Foreign rate differential & foreign taxes

 

 

104

 

 

 

28

 

Tax impacts of Evertel acquisition accounting

 

 

(525

)

 

 

—

 

 

$

(405

)

 

$

7,400

 

 

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, 2024 and 2023 were as follows:

 

 

September 30,

 

 

2024

 

 

2023

 

Deferred tax assets

 

 

 

 

 

 

Net operating loss carryforwards

 

$

12,357

 

 

$

10,665

 

Research and development credit

 

 

4,639

 

 

 

4,929

 

Share-based compensation

 

 

562

 

 

 

650

 

Patents

 

 

1,770

 

 

 

2,203

 

Accruals and other

 

 

2,227

 

 

 

2,071

 

Capitalized R&E expenses

 

 

3,893

 

 

 

1,916

 

Allowances

 

 

199

 

 

 

237

 

Gross deferred tax assets

 

 

25,647

 

 

 

22,671

 

Deferred tax liabilities

 

 

 

 

 

 

Equipment

 

 

(216

)

 

 

(274

)

Operating ROU assets

 

 

(619

)

 

 

(907

)

Acquired intangible assets

 

 

(1,592

)

 

 

(1,736

)

Gross deferred tax liabilities

 

 

(2,427

)

 

 

(2,917

)

Less valuation allowance

 

 

23,220

 

 

 

19,754

 

Net deferred tax assets and liabilities

 

$

—

 

 

$

—

 

 

As of September 30, 2024, the Company had net deferred tax assets and liabilities of approximately $0 due to the establishment of a full valuation allowance against its net deferred tax assets. The deferred tax assets are primarily comprised of federal and state NOL carryforwards and federal and state research and development (“R&D”) tax credit carryforwards offset by valuation allowance. As of September 30, 2024, the Company had federal and California NOL carryforwards of approximately $42,940 and $5,288, respectively. The federal NOLs if not utilized will expire from tax years September 30, 2025 through 2037, except for $16,489 which have an indefinite carryforward period. The California NOLs if not utilized will expire from tax years September 30, 2043 through 2044. The Company also has an estimated $2,887and $375 of federal and California R&D tax credits, respectively, as of September 30, 2024, where a portion of federal R&D tax credits will begin to expire next year. The California R&D tax credits do not expire.

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. As of September 30, 2024, the Company does not believe that it is more likely than not that its deferred tax assets will be realized; accordingly, a full valuation allowance has been established and no deferred tax asset is shown in the accompanying balance sheet.

As of September 30, 2024, 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.

Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, the annual use of the Company’s net operating loss and R&D tax credit carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has not completed an IRC Section 382/383 analysis regarding the limitation of net operating loss and research and development credit carryforwards. Due to the existence of the valuation allowance, any permanent limitations on the use of the Company’s net operating loss and research and development credit carryforwards will not impact the Company’s effective tax rate.

The Company is subject to taxation in the U.S. and various foreign jurisdictions. The Company’s U.S. federal tax returns since September 30, 2004 are subject to examination by the Internal Revenue Service due to the generation of U.S. federal NOL and credit carryforwards. The Company’s U.S. state returns are generally subject to examination for four years after the filing date.