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Note 10 - Income Tax | 12 Months Ended
--- | ---
Sep. 30, 2024
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 10. Income Tax The reconciliation of the combined Canadian federal and provincial statutory income tax rate to the approximate effective tax rate is as follows:
|  | Years Ended |
|  | September 30, 2024 |  |  | September 30, 2023 |
Net loss before recovery of income taxes |  | $ | (6,169,000 | ) |  | $ | (8,374,000 | )
Canadian federal and provincial statutory income tax rate |  |  | 26.5 | % |  |  | 26.5 | %
Expected income tax recovery |  | $ | (1,635,000 | ) |  | $ | (2,219,000 | )
Effect of foreign currency and foreign tax rate differences |  |  | (58,200 | ) |  |  | (207,200 | )
Permanent differences |  |  | 147,000 |  |  |  | 339,000 |
Share issuance cost booked through equity or capitalization |  |  | 36,000 |  |  |  | (89,000 | )
Non-capital losses limitation - U.S. |  |  | 0 |  |  |  | 899,000 |
Other |  |  | (38,000 | ) |  |  | (94,000 | )
Change in valuation allowance |  |  | 1,549,000 |  |  |  | 1,372,000 |
Income tax (recovery) expense |  | $ | 800 |  |  | $ | 800 |
Components of the net deferred tax asset or liability Deferred taxes are provided as a result of temporary differences that arise due to the difference between the income tax values and the carrying amount of assets and liabilities. Approximate deferred tax assets and liabilities are as follows:
|  | September 30, 2024 |  |  | September 30, 2023 |
Non-capital losses carried forward - Canada |  | $ | 15,547,000 |  |  | $ | 13,943,000 |
Non-capital losses carried forward - U.S. |  |  | 742,000 |  |  |  | 731,000 |
Research and development tax credits |  |  | 1,504,000 |  |  |  | 1,371,000 |
Share issuance and financing costs |  |  | 381,000 |  |  |  | 585,000 |
Right-of-use lease liabilities |  |  | 5,000 |  |  |  | 25,000 |
Other temporary differences |  |  | 21,000 |  |  |  | 44,000 |
Subtotal |  | $ | 18,200,000 |  |  | $ | 16,699,000 |
Less: valuation allowance |  |  | (18,074,000 | ) |  |  | (16,466,000 | )
Total net deferred tax assets |  | $ | 126,000 |  |  | $ | 233,000 |
Property and equipment |  | $ | (2,000 | ) |  | $ | (3,000 | )
Right-of-use assets |  |  | (5,000 | ) |  |  | (24,000 | )
Grant Income receivable |  |  | (71,000 | ) |  |  | (153,000 | )
Deferred share issuance costs |  |  | (48,000 | ) |  |  | (53,000 | )
Total deferred tax liabilities |  | $ | (126,000 | ) |  | $ | (233,000 | )
Net deferred taxes |  | $ | - |  |  | $ | - |
Realization of the deferred tax assets is dependent upon the generation of future taxable income, the amount and timing of which are uncertain. It is more likely than not that a tax benefit will not be realized. Accordingly, net deferred tax assets have been fully offset by a valuation allowance. Non-capital losses, capital losses, and research and development credits generated by Edesa Biotech USA, Inc. prior to changes in share ownership that occurred as a result of the reverse acquisition are substantially limited. It is unlikely that tax losses totaling $32.7 million and credits totaling $0.6 million will be utilized to offset potential future taxable income before expiration and they are excluded from deferred tax assets above. The approximate Canadian non-capital losses carried forward at September 30, 2024 expire as follows:
2025 |  | C$ | 16,000 |
2026 |  |  | 41,000 |
2027 |  |  | 84,000 |
2028 |  |  | 171,000 |
2029 |  |  | 507,000 |
2030 |  |  | 633,000 |
2031 |  |  | 504,000 |
2032 |  |  | 496,000 |
2033 |  |  | 79,000 |
2034 |  |  | 1,432,000 |
2035 |  |  | 1,628,000 |
2036 |  |  | 1,637,000 |
2037 |  |  | 1,564,000 |
2038 |  |  | 2,580,000 |
2039 |  |  | 1,279,000 |
2040 |  |  | 5,904,000 |
2041 |  |  | 9,366,000 |
2042 |  |  | 16,191,000 |
2043 |  |  | 7,890,000 |
2044 |  |  | 6,260,000 |
Total |  | C$ | 58,262,000 |
Share issuance and financing costs will be fully amortized in 2027. The U.S. non-capital losses carried forward at September 30, 2024 totaled approximately $3.42 million, which do not expire for federal taxes. The U.S. state research and development tax credits carried forward at September 30, 2024 totaled approximately $0.6 million, which do not expire for state taxes. The approximate U.S. state non-capital losses carried forward at September 30, 2024 expire as follows:
2039 |  | $ | 70,000 |
2040 |  |  | 150,000 |
2041 |  |  | 68,000 |
2042 |  |  | 6,000 |
2044 |  |  | 41,000 |
Total |  | $ | 335,000 |

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