cbdMD, Inc. Income Taxes Disclosure

NOTE 15 – INCOME TAXES 

 

The Company generated operating losses for the years ended September 30, 2025 and 2024 on which it has recognized a full valuation allowance. The Company accounts for is state franchise and minimum taxes as a component of its general and administrative expenses.

 

The following table presents the components of the provision for income taxes from continuing operations for the fiscal years ended September 30, 2025 and 2024:

 

		Year Ended September 30,
		2025				2024
Current
Federal		$	-			$	-
State			-				-
Total current			-				-
Deferred
Federal			-				-
State			-				-
Total deferred			-				-
Total provision		$	-			$	-

 

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

 

		Year Ended September 30,
		2025				2024
Federal statutory income tax rate			21.0	%			21.0	%
State income taxes, net of federal benefit			(0.8	)			2.1
Permanent differences			(4.3	)			11.9
Contingent derivative expense			0.0				0.5
Change in value of convertible debt			(1.0	)			(2.5	)
Expiration of tax carryovers			(28.9	)			-
Change in valuation allowance			14.0				(33.0	)
Provision for income taxes			0.0	%			0.0	%

 

Significant components of the Company’s deferred income taxes are shown below:

 

		Year Ended September 30,
		2025				2024
Deferred tax assets:
Net operating loss carryforwards		$	15,651,000			$	15,478,000
ROU - Liability			174,000				22,000
Capital loss carryforward			112,000				702,000
Allowance for doubtful accounts			134,000				77,000
Stock compensation			483,000				481,000
Intangibles			244,000				176,000
Investments			551,000				573,000
Accrued expenses			113,000				101,000
Inventory reserve			11,000				-
Fixed Assets			46,000				57,000
Capitalized expenses			159,000				146,000
Charitable contributions			8,000				13,000
Total deferred tax assets			17,686,000				17,826,000
Deferred tax liabilities:
Prepaid Expenses			(68,000	)			(76,000	)
ROU - Assets			(157,000	)			(19,000	)
Intangibles			-				-
Total deferred tax liabilities			(225,000	)			(95,000	)
Net deferred tax assets			17,461,000				17,731,000
Valuation allowance			(17,461,000)				(17,731,000	)
Net deferred tax liability		$	-			$	-

 

Net deferred tax liability

 

The Company has established a valuation allowance against net deferred tax assets due to the uncertainty that such assets will be realized. The deferred tax liabilities that result from indefinite life intangibles cannot be offset by deferred tax assets. The Company periodically evaluates the recoverability of the deferred tax assets. At such time as it is determined that it is more likely than not that deferred tax assets will be realizable, the valuation allowance will be reduced. Under Internal Revenue Code (IRC) Section 382, the use of net operating loss (“NOL”) carryforwards may be limited if a change in ownership of a company occurs. During the year ending September 30, 2018, the company determined that a change of ownership under IRC Section 382 had occurred during the years ending September 30, 2017 and 2015. As a result of these ownership changes, the pre-ownership change NOL carryforwards would be limited and approximately $2.1 million of such NOLs will expire before being utilized. Therefore, at September 30, 2018 the Company reduced the deferred tax asset and related valuation allowance associated with these NOLs by approximately $0.5 million due to IRC Section 382.

 

At September 30, 2025, the Company has utilizable NOL carryforwards of approximately $69.1 million which for federal purposes will carryforward indefinitely.

 

The Company accounts for its state franchise and minimum taxes as a component of its general and administrative expenses.

 

The Company files income tax returns in the United States, and various state jurisdictions. The Company’s policy is to recognize interest expense and penalties related to income tax matters as tax expense. At September 30, 2025 and 2024, there are no unrecognized tax benefits, and there are no significant accruals for interest related to unrecognized tax benefits or tax penalties.