Quarterly report pursuant to Section 13 or 15(d)

Income Taxes

v3.22.1
Income Taxes
 6 Months Ended
Mar. 31, 2022
Income Taxes [Abstract]  
Income Taxes Note 13 – Income Taxes

The Company accounts for income taxes using the liability method, which requires the recognition of deferred tax assets or liabilities for the tax-effected temporary differences between the financial reporting and tax bases of its assets and liabilities, and for net operating loss (NOL) and tax credit carryforwards.

As of September 30, 2021, the Company had U.S. federal and state NOL carryforwards of $38.6 million and $24.9 million, respectively, for income tax purposes with $29.5 million and $22.5 million, respectively, expiring in years 2022 to 2040 and $9.1 million and $2.4 million, respectively, which can be carried forward indefinitely. As of September 30, 2021, the Company also had U.S. federal research and development tax credit carryforwards of $4.2 million, expiring in 2038 to 2041. The Company’s U.K. subsidiary has U.K. NOL carryforwards of $63.5 million as of September 30, 2021, which can be carried forward indefinitely to be used to offset future U.K. taxable income.

A reconciliation of income tax expense and the amount computed by applying the U.S. statutory rate of 21% to (loss) income before income taxes is as follows:

Three Months Ended

Six Months Ended

March 31,

March 31,

2022

2021

2022

2021

Income tax (benefit) expense at U.S. federal statutory rates

$

(2,983,109)

$

(593,101)

$

(4,298,833)

$

3,041,159

State income tax (benefit) expense, net of federal (benefit) expense

(230,978)

(45,923)

(332,853)

235,473

Non-deductible expenses

102,733

—

359,929

—

Effect of stock options exercised

—

11,279

(23,350)

(53,011)

Effect of common stock purchase warrants exercised

—

—

—

(2,038,919)

Effect of Paycheck Protection Program funds

—

(26,340)

—

(122,226)

U.S. research and development tax credit

(913,000)

—

(2,876,430)

—

Effect of foreign income tax rates

(9,677)

4,993

(39,438)

(27,577)

Effect of global intangible low taxed income

(75,278)

(55,388)

12,989

69,757

Change in valuation allowance

4,043,065

727,034

7,132,661

(1,005,752)

Other, net

38,794

(864)

152,530

1,088

Income tax (benefit) expense

$

(27,450)

$

21,690

$

87,205

$

99,992

Significant components of the Company’s deferred tax assets and liabilities are as follows:

March 31,

September 30,

2022

2021

Deferred tax assets:

Federal net operating loss carryforwards

$

10,575,927

$

8,209,224

State net operating loss carryforwards

1,837,652

1,646,827

Foreign net operating loss carryforwards – U.K.

15,871,243

15,875,889

Foreign capital allowance – U.K.

117,709

117,709

U.S. research and development tax credit carryforwards

5,637,845

2,761,415

Share-based compensation

2,874,945

2,071,838

Interest expense

1,904,690

1,368,042

Change in fair value of derivative liabilities

1,350,792

1,025,425

Other, net – U.K.

83,344

83,344

Other, net – Malaysia

100,133

100,654

Other, net – U.S.

228,738

203,237

Gross deferred tax assets

40,583,018

33,463,604

Valuation allowance for deferred tax assets

(26,712,672)

(19,580,011)

Net deferred tax assets

13,870,346

13,883,593

Deferred tax liabilities:

In-process research and development

(882,427)

(882,427)

Covenant not-to-compete

(25,589)

(33,671)

Other, net – U.S.

(6,371)

(6,371)

Net deferred tax liabilities

(914,387)

(922,469)

Net deferred tax asset

$

12,955,959

$

12,961,124

The deferred tax amounts have been classified on the accompanying unaudited condensed consolidated balance sheets as follows:

March 31,

September 30,

2022

2021

Deferred tax asset – U.K.

$

12,919,252

$

12,923,896

Deferred tax asset – Malaysia

100,133

100,654

Total deferred tax asset

$

13,019,385

$

13,024,550

Deferred tax liability – U.S.

$

(63,426)

$

(63,426)

Total deferred tax liability

$

(63,426)

$

(63,426)