Income Taxes

12 Months Ended

Sep. 30, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The benefit for income taxes for the years ended September 30, 2020 and 2019 consists of, in thousands:

	2020		2019
Continuing operations:
Current	$	(1,249)	$	(13)
Deferred	—		—
	(1,249)		(13)
Discontinued operations – current	—		8
Total benefit for income taxes	$	(1,249)	$	(5)

The following table summarizes the differences between the U.S. federal statutory rate and the Company’s effective tax rate for continuing operations financial statement purposes for the years ended September 30, 2020 and 2019:

	2020		2019
Statutory tax rate	21.0	%	21.0	%
State income taxes, net of U.S. federal tax benefit	4.8	%	6.6	%
Return to accrual adjustment	—	%	(0.6	%)
Tax credits	—	%	—	%
Charges without tax benefit	0.1	%	(5.3	%)
Valuation allowance	(19.4	%)	(22.1	%)
Other exclusions	0.1	%	0.7	%
Company’s effective tax rate	6.6	%	0.3	%

The charges without tax benefit rate includes, among other things, the impact of officer life insurance, nondeductible meals and entertainment and permanent basis differences in goodwill.

As a result of the CARES Act, the Company can carryback net operating losses (NOL) generated in 2018 through 2020 for a period of five years. As a result, the Company’s effective tax rate included an income tax benefit recognized during the fiscal year ended September 30, 2020 related to tax losses generated during the fiscal year up to the amount that the Company estimates is realizable based upon taxable income in the carryback periods. Therefore, as of September 30, 2020, the Company recorded a $1.2 million income tax receivable and a corresponding current benefit for income taxes. The Company continues to provide a valuation allowance of $6.4 million for all net deferred tax assets where the Company believes it is more likely than not that those deferred taxes will not be realized.

The tax effects of temporary differences related to deferred taxes at September 30, 2020 and 2019 consist of the following, in thousands:

	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	4,659	$	2,632
Accounts receivable	69		41
Inventory	883		393
Intangibles	1,259		707
Accrued expenses	132		53
Stock options	14		109
Investment in equity method investee	100		112
Other	—		—
Total deferred tax assets	7,116		4,047
Deferred tax liabilities:
Financial basis in excess of tax basis of certain assets	416		705
Other	323		95
Total deferred tax liabilities	739		800
Less valuation allowance	6,377		3,247
Net deferred taxes	$	—	$	—

The Company’s U.S. Federal net operating loss (“NOL”) carryforwards consist of the following, in thousands:

	NOL carryforward		Year Expires
Year ended September 30, 2020	$	10,100,000	No expiry
Year ended September 30, 2019	$	2,569,000	No expiry
Year ended September 30, 2018	$	2,431,000	No expiry
Year ended September 30, 2016	$	82,820	2036

The Company records net deferred tax assets to the extent the Company believes these assets will more likely than not be realized.  In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial performance. The Company has concluded, based on its recent cumulative losses, that it is more likely than not that the Company will not be able to realize the full effect of the deferred tax assets and a valuation allowance of $6.4 million is needed.

Based upon a review of its income tax positions, the Company believes that its positions would be sustained upon an examination by the Internal Revenue Service and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded. Generally, the Company is no longer subject to examinations by the U.S. federal, state or local tax authorities for tax years before 2017.