Income Taxes

12 Months Ended

Apr. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 11. Income Taxes

The components of the Company’s loss before income taxes for the years ended April 30 consisted of the following (in thousands):

	2022			2021			2020
Domestic	$	(21,145	)	$	(10,909	)	$	(6,337	)
Foreign		(61,194	)		(35,335	)		(22,903	)
	$	(82,339	)	$	(46,244	)	$	(29,240	)

For the years ended April 30, 2022 and 2021, the Company did not record any U.S. Federal income tax benefit or expense. For the year ended April 30, 2020, the Company recorded a U.S. Federal income tax benefit of $124,000.

A reconciliation between the effective tax rates and statutory rates for the years ended April 30 is as follows:

	2022			2021			2020
Income tax benefit at U.S. federal statutory    rate		21.0	%		21.0	%		21.0	%
Foreign rate differential		(1.5	)%		(1.6	)%		(1.6	)%
Nondeductible expenses - UK R&D credit		(10.6	)%		(8.3	)%		(12.1	)%
Other		(0.8	)%		0.4	%		(0.5	)%
Valuation allowance		(8.1	)%		(11.5	)%		(6.6	)%
		—			—			0.2	%

The tax effect of significant temporary differences representing deferred tax assets and liabilities as of April 30 is as follows (in thousands):

	2022			2021
Deferred tax assets:
Net operating loss (“NOL”) carryforwards	$	23,219		$	14,410
Operating lease liabilities		1,634			1,183
Other		4,936			2,615
Subtotal		29,789			18,208
Less: valuation allowance		(28,212	)		(17,030	)
Deferred tax assets, net of valuation allowance		1,577			1,178
Deferred tax liabilities:
Operating lease - Right-of-use assets		(1,570	)		(1,158	)
Other		(7	)		(20	)
Net deferred tax asset	$	—		$	—

Management of the Company has determined it is not more likely than not that the Company will recognize the benefits of net deferred tax assets, the majority of which are NOLs, and has provided a valuation allowance for the full amount of deferred tax assets as of April 30, 2022 and 2021, respectively. During the years ended April 30, 2022 and 2021 the valuation allowance changed by $11.2 million. Realization of deferred tax assets is dependent upon the generation of future taxable income.

The ability to utilize the Company’s domestic net operating losses is limited due to changes in ownership as defined by Section 382 of the Internal Revenue Code (the “Code”). Under the provisions of Sections 382 and 383 of the Code, a change of control, as defined in the Code, imposes an annual limitation on the amount of the Company’s net operating loss and tax credit carryforwards, and other tax attributes that can be used to reduce future tax liabilities. The Company determined that ownership changes occurred as a result of public offerings in December 2005, a transaction in November 2016 and a public offering in September 2018. The offering in September of 2018 resulted in an ownership change as of February 2019.

As of April 30, 2022, the Company has NOL carryforwards for U.S. federal income taxes of $6.0 million that expire in 2036 and $11.7 million that can be carried forward indefinitely. The $6.0 million of NOL expiring in 2036 is subject to an annual Section 382 limitation of $0.3 million. The $11.7 million of indefinite NOL is not currently subject to an annual Section 382 limitation. The Company also has NOL carryforwards for state income taxes of $14.9 million that begin to expire in 2036 and NOL carryforwards for U.K. income taxes of $74.0 million that do not expire.

The Company has $83.0 million of NOLs subject to Section 382 limitation. As a result of these ownership changes, it is estimated that the effect of Section 382 will generally limit the amount of the net operating loss carryforwards that are available to offset future taxable income to approximately $0.3 million, annually. Due to this annual limitation, the company expects $76.7 million of federal NOL to go unutilized.

The Company has $1.5 million of R&D credit carryforward subject to Section 383 limitation. As a result of these ownership changes, it is estimated that the effect of Section 383 will limit the company to $0.1 million of credits to utilize, with $1.4 million of credit to expire unutilized.

The Company recognizes the financial statement effects of a tax position when it becomes more likely than not, based upon the technical merits, that the position will be sustained upon examination. The Company files U.S. Federal tax returns, as well as certain state returns. The Company also files tax returns in the United Kingdom. The Company is subject to U.S. Federal, state, and U.K. income tax examinations by authorities for tax years ending after 2017. There are currently no federal, state, or U.K. audits in process. Tax year 2018 and subsequent years contain matters that could be subject to differing interpretations of the applicable tax laws and regulations as it relates to the amount and or timing of income, deductions, and tax credits. Although the outcome of tax audits is always uncertain, management has analyzed the Company’s tax positions taken for all open tax years and has concluded that no provision for unrecognized tax benefits from uncertain tax positions is required in the Company’s consolidated financial statements for the years ended April 30, 2022 and 2021, respectively.