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Income taxes
12 Months Ended
Jun. 30, 2024
Income Tax Disclosure [Abstract]  
Income taxes

14. Income taxes

Loss from operations before income taxes was comprised of the following (in thousands):

 

 

 

Twelve Months Ended June 30,

 

 

 

2024

 

 

2023

 

United Kingdom and other

 

$

(12,501

)

 

$

(712

)

United States

 

 

(20,951

)

 

 

(44,894

)

 

$

(33,452

)

 

$

(45,606

)

 

Due to the pretax losses reported in both the United Kingdom and United States for all periods since inception there is no income tax expense or benefit but for an immaterial amount of Ireland income tax expense for the period ended June 30, 2024.

A reconciliation of income tax benefit from continuing operations as reflected in the financial statements is as follows:

 

 

Twelve Months Ended June 30,

 

 

 

 

2024

 

 

2023

 

 

U.K tax benefit at statutory rate

 

 

(25.0

)

%

 

(20.5

)

%

State taxes, net of federal benefit

 

 

(4.4

)

 

 

(10.4

)

 

Permanent differences

 

 

0.7

 

 

 

0.9

 

 

Research and development

 

 

 

 

 

 

 

Change in valuation allowance

 

 

28.4

 

 

 

31.2

 

 

Foreign rate differential

 

 

3.9

 

 

 

(1.1

)

 

Deferred only

 

 

(4.3

)

 

 

 

 

Rate change

 

 

0.9

 

 

 

 

 

Other

 

 

(0.2

)

 

 

(0.1

)

 

Effective tax rate

 

 

0.0

 

%

 

0.0

 

%

 

The principal components of the Company’s deferred tax assets and liabilities were as follows (in thousands):

 

 

Twelve Months Ended June 30,

 

 

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Net operating losses

 

 

45,962

 

 

$

37,740

 

Capitalized research and development costs

 

 

3,907

 

 

 

2,826

 

Research and development licenses

 

 

2,352

 

 

 

2,814

 

Share-based compensation

 

 

2,758

 

 

 

1,327

 

Accrued expenses

 

46

 

 

 

964

 

Mark-to-market securities

 

384

 

 

 

256

 

Lease liabilities

 

14

 

 

 

55

 

Other

 

97

 

 

 

73

 

Valuation allowances

 

 

(55,438

)

 

 

(45,602

)

Total deferred tax assets

 

 

82

 

 

 

453

 

Deferred tax liabilities:

 

 

 

 

 

 

Depreciation

 

 

(66

)

 

 

(386

)

Mark-to-market securities

 

 

 

 

 

Right-of-use assets

 

 

 

 

(51

)

Unrealized foreign exchange loss

 

 

(16

)

 

 

(16

)

Total deferred tax liabilities

 

 

(82

)

 

 

(453

)

Net deferred tax

 

$

 

 

$

 

 

The Company does not have unrecognized tax benefits as of June 30, 2024 and 2023. The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

The Company’s net operating loss carryforwards (“NOL”) for U.K., U.S. federal and U.S. state income tax purposes consisted of the following (in thousands):

 

 

Twelve Months Ended June 30,

 

 

 

2024

 

 

2023

 

United Kingdom

 

$

38,384

 

 

$

26,569

 

U.S. Federal

 

 

116,768

 

 

 

98,555

 

U.S. State and Local

 

 

202,300

 

 

 

177,306

 

 

The UK and federal net operating loss carryforwards have no expiration dates. The amount of UK annual profits that can be relieved by losses carried forward is limited to 50%, in excess of a threshold amount of £5 million of profits. Under the Tax Cuts and Jobs Act of 2017 ("TCJA") as modified by the Coronavirus Aid, Relief, and Economic Security (CARES) Act, or collectively, the Tax Acts, U.S. federal net operating losses incurred for taxable years beginning after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal net operating losses may be limited to 80% of taxable income in taxable years beginning after December 31, 2020. The federal NOL amount will carry forward indefinitely. Certain state net operating loss carryforwards begin to expire in 2038. The Company recorded a valuation allowance on the deferred tax assets as of June 30, 2024 and 2023 because of the uncertainty of their realization. The valuation allowance increased by $9.8 million for the year ended June 30, 2024 and $14.5 million for the year ended June 30, 2023.

Utilization of the net operating losses and general business tax credits carryforwards may be subject to a substantial limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if changes in ownership of the company have occurred previously or will occur in the future. Ownership changes may limit the amount of net operating losses and general business tax credits carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of 5-percent shareholders in the stock of a corporation by more than 50 percentage points over a three-year period. If the Company experiences a Section 382 ownership change, the tax benefits related to the NOL carry forwards may be further limited or lost. The Company may also experience ownership changes as a result of shifts in share ownership, some of which are outside its control. Therefore, as a result of ownership changes with respect to ordinary shares, the ability to use current net operating losses and other pre-change tax attributes to offset post-change taxable income or taxes could be subject to limitation. The Company has not undertaken a Section 382 study.

For tax years beginning on or after January 1, 2022, the TCJA eliminates the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174.

The Company files income tax returns in the United Kingdom, Ireland, the U.S. federal jurisdiction and various state jurisdictions. The Company's 2018 through 2023 tax years remain subject to examination. Carryforward attributes from prior years may be adjusted upon examination by tax authorities if they are used in an open period.