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INCOME TAXES

12 Months Ended

Sep. 30, 2021

INCOME TAXES.

INCOME TAXES

NOTE 16 – INCOME TAXES

On December 2, 2019, we entered into a tax sharing agreement with Mullen Technologies Inc. Although our results are included in the Mullen Technologies consolidated tax return for U.S. federal income tax purposes, our tax provision is calculated primarily as though MAI was a separate taxpayer. However, under certain circumstances, transactions between us and Mullen Technology are assessed using consolidated tax return rules. Tax sharing agreement governs the payment of tax liabilities and entitlement to refunds thereof, allocate responsibility for, and cooperation in, the filing of tax returns, and provide for certain other matters relating to taxes

For the years ended September 30, 2021 and 2020, we had income tax NOL carryforwards of approximately $193 million for Federal and $192 million for California, which will expire as follows:

​

​	​	​	​
NOL Carryforward			​
​		2021
Federal		​
2034-2037	​	$	29,838,716
Indefinite	​	$	162,818,819
​	​	​	​
Total Federal	​	$	192,657,535
​	​	​	​
California	​
2034-2040	​	$	191,722,566
​	​	​	​
Total California	​	$	191,722,566

​

​	​	​	​	​	​	​
​		2021 - $			2021 - %	​
​	​	​	​	​	​	​
Income tax benefit at statutory rate	​	$	(9,247,200)		21.00	%
State income taxes	​		800		0.00	%
Permanent Differences	​		158,166		(0.36)	%
Valuation Allowance	​		9,091,163		(20.65)	%
Other	​		(2,129)		0.00	%
Total (benefit) provision for income taxes	​	$	800		0.00	%

​

We record deferred income taxes using enacted tax laws and rates for the years in which the taxes are expected to be paid. Deferred income tax assets and liabilities are recorded based on the differences between the financial reporting and income tax bases of assets and liabilities.

Significant components of the Company’s net deferred tax assets as of September 30, 2021, are as follows:

​

​	​	​	​	​	​	​
​		2021			2020
Deferred tax assets:		​			​
Net Operating loss carryforwards		​	38,676,405		​	31,413,378
Charitable Contributions		​	894		​	1,176
Accrued Expenses		​	315,555		​	104,164
Impairment Other		​	—		​	83,845
Other Assets		​	364,419		​	261,842
163(j) Limitation		​	14,491,332		​	4,178,291
​	​	​	​	​	​	​
Total gross deferred tax assets		​	53,848,604		​	36,042,696
​	​	​	​	​	​	​
Less valuation allowance		​	(53,416,875)		​	(35,747,087)
​	​	​	​	​	​	​
Total net deferred tax assets		​	431,729		​	295,609
​	​	​	​	​	​	​
Deferred tax liabilities:		​			​
​	​	​	​	​	​	​
Intangibles		​	(146,639)		​	(157,641)
Fixed Assets		​	(284,922)		​	(137,632)
Other		​	(168)		​	(336)
​	​	​	​	​	​	​
Total deferred tax liabilities		​	(431,729)		​	(295,609)
​	​	​	​	​	​	​
Net deferred tax assets	​	$	0	​	$	—

​

For the years ended September 30, 2021 and 2020, we recorded a full valuation allowance against the deferred tax assets because we do not believe that the deferred tax assets recorded in 2021 and 2020 are more likely than not to be realizable.

We follow the guidance for accounting for uncertainty in income taxes in accordance with FASB ASC 740, which clarifies uncertainty in income taxes recognized in an enterprise’s financial statements. The standard also prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken, or expected to be taken, in an income tax return. Only tax positions that meet the more likely than not recognition threshold may be recognized. In addition, the standard provides guidance on derecognition, classification, interest and

penalties, accounting in interim periods, and disclosure. As of September 30, 2021, the Company has recorded $15.2M related to unrecognized tax benefits. Tax years for 2014 through 2021 are subject to examination by the tax authorities.

Tax Reform. The Tax Cuts and Jobs Act of 2017 (the “TJCA”) was enacted on December 22, 2017, and among other changes, reduced the federal statutory tax rate from 35.0% to 21.0%. In accordance with U.S. GAAP for income taxes, as well as SEC Staff Accounting Bulletin No. 1187 (“SAB”), the Company made a reasonable estimate of the impacts of the TJCA and recorded this estimate in Company results for the year ended September 30, 2021. SAB 118 allows for a measurement period of up to one year, from the date of enactment, to complete the accounting for the impact of TJCA. As of September 20, 2021, our analysis of under SAB 118 was completed and resulted in no material adjustments to the provisional amounts recorded as of September 30, 2021.

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The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

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