Note 14 - Income Taxes

12 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Income Tax Disclosure [Text Block]

14. INCOME TAXES

Income taxes consisted of the following:

	Years ended September 30,
	2021		2020
Current tax provision
Federal	$	-	$	-
State		1		2
Total current tax provision		1		2
Deferred provision
Federal		368		(4,852	)
State		65		(856	)
Total deferred provision		433		(5,708	)
Provision (benefit) for income taxes	$	434	$	(5,706	)

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

	Years ended September 30,
	2021			2020
Income taxes computed at the federal statutory rate	$	239		$	1,296
Change in valuation allowance		435			(7,134	)
Nondeductible compensation, interest expense and other		57			24
State income taxes, net of federal tax benefit		210			364
Change in R&D credit carryover		19			(219	)
Stock options and other prior year true-ups		(175	)		(7	)
Foreign rate differential		(117	)		(21	)
State business credit utilization		(234	)		(9	)
Provision (benefit) for income taxes	$	434		$	(5,706	)

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, 2021 and 2020 were as follows:

	At September 30,
	2021			2020
Deferred tax assets
Net operating loss carryforwards	$	11,769		$	11,985
Research and development credit		5,479			5,686
Share-based compensation		538			317
Patents		8			15
Accruals and other		2,487			2,526
Allowances		237			183
Gross deferred tax asset		20,518			20,712
Deferred tax liabilities
Equipment		(352	)		(405	)
Operating ROU assets		(1,222	)		(1,334	)
Acquired intangible assets		(2,592	)		-
Gross deferred tax liabilities		(4,166	)		(1,739	)
Less valuation allowance		(8,313	)		(7,878	)
Total deferred tax assets, net of valuation allowance	$	8,039		$	11,095

As of September 30, 2021, the Company had net deferred tax assets of approximately $8,039. The deferred tax assets are primarily composed of federal and state NOL carryforwards and federal and state research and development (“R&D”) credit carryforwards. As of September 30, 2021, the Company had federal NOL carryforwards of approximately $35,819, which expire from 2023 through 2037, except for $1,262 that have an indefinite carryforward period. The Company also has an estimated $2,373 and $176 of federal and state R&D tax credits, respectively, as of September 30, 2021, a portion of which will begin to expire in the current tax year.

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. The Company expects to utilize the deferred tax asset in the future, except for those related to federal R&D tax credit carryforwards and net operating loss carryforwards, R&D credits and foreign tax credits related to Genasys Spain and Genasys Canada and continues to maintain a partial allowance of $8.313. Since future financial results may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.

As of September 30, 2021, 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.

The Company is subject to taxation in the U.S. and various state jurisdictions. All of the Company’s historical tax years are subject to examination by the Internal Revenue Service and various state jurisdictions due to the generation of NOL and credit carryforwards.