Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.25.3
Income Taxes
 12 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
Note 16: Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Income tax expense for the years ended September 30, 2025 and 2024 is as follows (in $000’s):
Year Ended
September 30,
2025		 Year Ended
September 30,
2024
Current expense:
Federal $ 2,411  $ 1,696 
State 361  528 
2,772  2,224 
Deferred expense (benefit):
Federal 2,443  (5,311)
State 445  (1,571)
2,888  (6,882)
Total income tax (benefit) expense
 $ 5,660  $ (4,658)
A reconciliation of the differences between the effective and statutory income tax rates for years ended September 30, 2025 and 2024:
Year Ended
September 30,
2025		 Year Ended
September 30,
2024
Federal statutory rates 21.0 % (21.0 %)
State income taxes, net of federal benefit 5.6 % (6.2 %)
Goodwill impairment
 — % 8.8 %
Non-taxable income
 (2.6 %) — %
Permanent differences 0.2 % 0.1  %
Investments
 —  % 4.6 %
Stock compensation 0.5 % — %
Change in tax rates
 (0.6 %) 3.6  %
Tax credits
 (0.3 %) (0.2) %
Change in valuation allowance 0.4  % (4.4) %
Other (4.3) % (0.4 %)
Effective rate 19.9 % (15.2 %)
At September 30, 2025 and 2024, deferred income tax assets and liabilities were comprised of (in $000’s):
September 30,
2025		 September 30,
2024
Deferred income tax assets (liabilities):
Allowance for bad debts $ 149  $ 192 
Accrued expenses/reserves
 4  24 
Inventory 2,201  2,594 
Accrued compensation 200  197 
Research and development
 496  564 
Net operating loss 2,203  2,320 
Tax credits 581  508 
Stock compensation 144  247 
Intangibles (10,394) (4,972)
Property & equipment (10,997) (12,544)
Right of use assets (14,113) (15,201)
Lease liabilities 15,381  17,192 
Interest carryforwards
 7,321  4,827 
Subtotal income tax assets (liabilities)
 (6,824) (4,052)
Less: Valuation allowance (2,332) (2,215)
Total deferred income tax liability
 $ (9,156) $ (6,267)

The Company has federal and state net operating loss carryforwards of approximately $7.4 million and $9.1 million, respectively, as of September 30, 2025. The Company has placed a valuation allowance of approximately $6.3 million on the federal net operating loss carryforward due to Internal Revenue Code Section ("IRC Sec.") 382 limitations. Additionally, the Company has placed a full valuation allowance against their state net operating loss carryforwards due to separate return limitations. The Company has IRC Sec. 163(j) interest carryforwards of approximately $27.6 million as of September 30, 2025, which have an indefinite carryforward period. The Company has state tax credit carryforwards as of September 30, 2025 of approximately $0.7 million. For the year ended September 30, 2025, the Company received approximately $2.1 million in Employer Retention Credit refunds related to the 2020 and 2021 calendar years. These refunds were recorded as other income in the Company’s consolidated statements of income (loss) for the year ended September 30, 2025.
The Company evaluates all available evidence to determine if a valuation allowance is needed to reduce its deferred tax assets. Management has concluded that it is more likely than not that a portion of its existing tax benefits will not be realized. Accordingly, the Company has recorded a valuation allowance of approximately $2.3 million at September 30, 2025 to reduce its deferred tax assets.
The Company annually conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of September 30, 2025. The Company is currently not under audit in any jurisdictions. The 2020 through 2023 tax years are open to examination by the various federal and state jurisdictions in which the Company operates. The Company’s policy is to record uncertain tax positions as a component of income tax expense.
On July 4, 2025, the One Big Beautiful Bill Act was enacted, making permanent and expanding several corporate tax provisions originally introduced under the Tax Cuts and Jobs Act of 2017. The key changes include, immediate expensing of research and experimentation costs, restoration of EBITDA-based interest deductibility under §163(j), and extension of 100% bonus depreciation through 2030. The Company has evaluated the impact of these provisions and anticipates improvement in near-term cash flows related to income taxes beginning in fiscal year 2026.