Annual report pursuant to Section 13 and 15(d)

Income taxes

v3.21.2
Income taxes
12 Months Ended
Jun. 30, 2021
Income Tax Disclosure [Abstract]  
Income taxes
11. Income taxes
Loss before provision for income taxes consisted of the following:
 
(US$’000)
  
Year Ended
June 30,
 
 
  
2021
 
  
2020
 
United States
  
$
(7,911
  
$
(299
International
  
 
(5,971
  
 
(7,975
 
  
 
 
 
  
 
 
 
Total
  
$
(13,882
  
$
(8,274
 
  
 
 
 
  
 
 
The tax effects of significant items comprising the Company’s deferred taxes are as 
follows:
 
(US$’000)
  
Year Ended
June 30,
 
    
2021
    
2020
 
Deferred tax assets:
                 
Net operating losses
   $ 15,902      $ 13,153  
Other
     230        209  
Lease liability
     45        85  
Share-based compensation
     88        —    
Intangible assets
     212        —    
    
 
 
    
 
 
 
Gross deferred tax assets
     16,477        13,447  
Less valuation allowance
     (16,223      (13,290
    
 
 
    
 
 
 
       254        157  
Deferred tax liabilities:
                 
Right-of-use
assets
     (42      (83
Fixed assets
     (76      (74
Prepaid expenses
     (136      —    
    
 
 
    
 
 
 
Total deferred tax liabilities
     (254      (157
    
 
 
    
 
 
 
Net deferred taxes
   $ —        $ —    
    
 
 
    
 
 
 
ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforw
a
rds be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. As of June 30, 2021, and 2020, the Company established a valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such
assets.
The valuation allowance increased by $2,933 during the year ended June 30, 2021. Net operating losses and tax credit carryforwards as of June 30, 2021 are as follows:
 
(US$’000)
  
Amount
    
Expiration

Years
 
Net operating losses, federal (post-December 31, 2017)
   $ 8,797        Do not expire  
Net operating losses, federal (post-December 31, 2017)
     —          —    
Net operating losses, state
     5,314       
2031-2034
 
Net operating losses, Australia
     52,623        Do not expire  
The effective rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows:
 
 
  
Year Ended
June 30,
 
 
  
2021
 
 
2020
 
Statutory rate
     21.00     21.00
Permanent differences
     (8.9 %)      (2.4 %) 
Share-based payments
     (0.32 %)      (0.74 %) 
Change in valuation allowance
     (13.9 %)      (24.12 %) 
Foreign tax rate differential
     2.12     6.26
    
 
 
   
 
 
 
Total
     (0.00 %)      (0.00 %) 
    
 
 
   
 
 
 
The Company is subject to taxation in the U.S., various state jurisdictions and Australia. The Company’s tax returns for the tax years 2014 through 2019 are open and are subject to examination by federal taxing authorities and the Company’s tax returns for tax years 2011 through 2019 are subject to examination by state taxing authorities. The Company is not currently undergoing a tax audit in any federal, state or Australian jurisdiction. The Company does not have any uncertain tax benefits “(UTBs)” as of June 30, 2021 and does not expect its UTBs to change significantly over the next 12 months.
Internal Revenue Code Section 382 places a limitation (“Section 382 Limitation”) on the amount of taxable income that can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. California has similar rules. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods.
Under Australian income tax legislation, losses can be utilized by the Company if it satisfies firstly the Continuity of Ownership Test (“COT”) or if failing that, the Similar Business Test (“SBT”). Broadly, the COT requires a company to show that it maintained continuity of majority beneficial ownership from the beginning of the year in which a lo
s
s is incurred to the end of an income year in which a tax loss is sought to be recouped. The SBT requires a company to demonstrate that a “similar business” has been maintained from the time when the COT is failed and throughout the period until the end of the income year that the losses are being recouped.
On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (“CARES”) Act was enacted and signed into law and GAAP requires recognition of the tax effects of new legislation during the reporting period that includes the enactment date. The CARES Act includes changes to the tax provisions that benefits business entities, and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act. The tax relief measures for
 
businesses
 
in the
 
CARES Act include a
five-year
net operating loss carryback for certain net operating losses, suspension of the annual deduction limitation of
80
% of taxable income for certain net operating losses, changes in the deductibility of interest, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property.
The CARES Act also provides other
non-tax
benefits to assist those impacted by the pandemic. The Company evaluated the impact of the CARES Act and determined that there is no material impact to the income tax provision for the fiscal year ended June 30, 2021.
On June 29, 2020, California Assembly Bill 85 (AB 85) was signed into law, which suspends the use of net operating losses and limits the use of research tax credits for 2020, 2021 and 2022, respectively. The Company evaluated the impact of AB 85 and determined that the new legislation did not materially impact the Company’s income tax provision for the fiscal year ended June 30, 2021.