Annual report pursuant to Section 13 and 15(d)

Income Taxes

Income Taxes
12 Months Ended
Sep. 30, 2023
Income Taxes  
Income Taxes

11. Income Taxes


The components of the provision for income taxes is as follows:             



Year Ended September 30,









Current expense (benefit):









$ -



$ -











Total current expense (benefit):


$ 343



$ 578











Deferred expense (benefit):











$ (6,268 )


$ 4





(1,324 )





Total deferred expense (benefit):


$ (7,592 )


$ 10











Total income tax expense (benefit):


$ (7,249 )


$ 588



A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate is as follows: 




Year Ended September 30,









Income tax at US statutory rate


$ 455



$ 4,239


State taxes, net of federal benefit



(1,053 )





Tax credits



(111 )



(209 )

Stock compensation









Goodwill impairment









PPP related matters







(3,522 )

Valuation allowance



(6,615 )



(885 )








(137 )



$ (7,249 )


$ 588


The net deferred income tax asset balance related to the following:   




Year Ended September 30,









Net operating loss carryforwards


$ 4,368



$ 4,255


Stock options









Allowance for doubtful accounts









Accrued and prepaid expenses









Tax credit carryforwards









ROU liability



























Total deferred tax assets


$ 12,160



$ 11,703













$ (4,262 )


$ (4,002 )

ROU asset



(827 )



(615 )




(7 )



(33 )

Total deferred tax liability


$ (5,096 )


$ (4,650 )










Deferred tax asset


$ 7,064



$ 7,053


Valuation allowance







(7,581 )

Net deferred tax asset (liability)


$ 7,064



$ (528 )


As of September 30, 2023, the Company had federal and state net operating loss carryforwards of approximately $17.4 million and $22.9 million, respectively, which begin to expire in tax years 2031 for federal and 2023 for state purposes. Of the $17.7 million of federal net operating losses, $14.6 million can be carried indefinitely.


Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of September 30, 2023, and 2022, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years. The Company also considered whether there was any currently available information about future years. As of September 30, 2023, in part because in the current year we achieved three years of cumulative pretax income, management determined that there is sufficient positive evidence to conclude that it is more likely than not that the deferred taxes are realizable. It therefore released the valuation allowance accordingly.


Under Internal Revenue Code 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We have not completed a study to assess whether an “ownership change” has occurred or whether there have been multiple ownership changes since we became a “loss corporation” as defined in Section 382. Future changes in our stock ownership, which may be outside of our control, may trigger an “ownership change”. In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an “ownership change.” If an “ownership change” has occurred or does occur in the future, utilization of the NOL carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability to us.


The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states and local tax jurisdictions in which we operate or do business in. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

We record tax positions as liabilities in accordance with ASC 740 and adjust these liabilities when our judgement changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the recognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of September 30, 2023, and 2022 we have not recorded any material uncertain tax positions in our consolidated financial statements.


We recognize interest and penalties related to uncertain tax benefits on the income tax expense line in the accompanying consolidated statements of operations. As of September 30, 2023, and 2022, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheets.


The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax years are still open under statute from September 30, 2020, to the present. Earlier years may be examined to the extent that the net operating loss carryforwards from those earlier years are used in future periods. The resolution of tax matters is not expected to have a material effect on the Company’s consolidated financial statements.