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INCOME TAXES
 12 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 21 – INCOME TAXES

 

The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017. The Tax Act reduces the maximum U.S. federal corporate tax rate from 35% to 21%, allows net operating losses incurred in 2018 and beyond to be carried forward indefinitely, allows alternative minimum tax carryforwards to be partially refunded, beginning in 2018, and fully refunded by 2021, and creates new taxes on certain foreign sourced earnings.

 

At September 30, 2024, the Company had approximately $15,052,834 of federal, $5,209,518 of state, and $1,646,625 of foreign net operating loss carryforwards. The net operating loss carryforwards, if not utilized, will begin to expire in 2030 for federal purposes and in 2026 for state purposes. The company is currently reviewing net operating losses for Section 382 limitation purposes and will make any required adjustments to the net operating losses at the completion of the study.

 

The following is a geographical breakdown of loss before the provision for income taxes.

 

   2024   2023 
   Year ended September 30, 
   2024   2023 
         
Domestic  $(7,090,508)  $(6,279,077)
Foreign   (385,841)   277,964 
Loss before provision for income taxes  $(7,476,349)  $(6,001,113)

 

The provision for income taxes consisted of the following.

 

   September 30, 2024   September 30, 2023 
Current (benefit)/provision          
Federal  $-   $- 
State   165,093    319,427 
Foreign   37,187    74,845 
Total current (benefit)/provision   202,280    394,272 
           
Deferred provision          
Federal   -    - 
State   -    - 
Foreign   -    - 
Total deferred provision  $-   $- 
           
Total (benefit)/provision for income taxes  $202,280   $394,272 

 

 

The following is a reconciliation of the effective income tax rate to the federal and state statutory rates.

 

   For the Fiscal Year   For the Fiscal Year 
   Ended   Ended 
   September 30, 2024   September 30, 2023 
         
U.S. statutory rate   21.00%   21.00%
State taxes, net of federal   -1.74%   -4.21%
Foreign tax rate differential   -0.23%   -0.45%
Change in valuation allowance   -13.23%   -22.51%
Return to provision   -1.44%   0.98%
State Rate Change   -0.50%   0.00%
Goodwill impairment   -1.49%   0.00%
Write-Off of Related Party Note with Majority Owner   -2.35%   0.00%
Issuance Costs - Equity Financing   -2.80%   0.00%
Fair Value Adjustments on Warrants   1.64%   0.00%
Global intangible income   0.00%   -0.97%
Other permanent differences   -1.56%   -0.42%
Effective Tax Rate   -2.71%   -6.57%

 

The components of our deferred tax assets and liabilities are summarized as follows.

 

   September 30, 2024   September 30, 2023 
Deferred Tax Assets:          
Net operating Loss carryforwards  $21,908,977   $20,375,296 
Inventory and other reserves    1,363,737    1,221,903 
Allowance for bad debt   32,919    32,633 
Interest Expense Limitation   4,751,442    4,193,177 
Accruals   439,996    293,956 
Capitalized R&D   852,417    

27,359

 
Warranty reserve   27,287    476,045 
Other   15,270    6,927 
Total gross deferred taxes   29,392,045    26,627,296 
Valuation allowance   (28,127,540)   (24,744,527)
Net deferred tax assets   1,264,505    1,882,769 
           
Deferred Tax Liabilities:          
Deferred revenue   (296,090)   (363,423)
Prepaid expenses   (132,685)   (127,852)
Goodwill amortization   (10,020)   (512,702)
Depreciation   (825,710)   (878,792)
Total deferred tax liabilities   (1,264,505)   (1,882,769)
           
Total deferred tax assets (liabilities)  $-   $- 

 

Management has concluded that it is more likely than not that the deferred tax assets will not be realized and has reduced the asset by a valuation allowance.