Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.24.4
Income Taxes
 12 Months Ended
Sep. 29, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

Note 13 — Income Taxes

 

The income tax provision for the years ended September 29, 2024 and October 1, 2023 include the following:

 

    2024     2023  
    (Thousands)  
    2024     2023  
Current income tax expense:                
Current year federal income tax   $ 1,045     $ 484  
Prior year tax adjustment     (14 )     (35 )
Current income tax expense     1,031       449  
Deferred income tax provision (benefit):                
Federal     (25 )     20  
                 
Provision for income taxes, net   $ 1,006     $ 469  

 

As of September 29, 2024 and October 1, 2023, Optex Systems Inc. has a net carrying value of $0.9 million in deferred tax assets represented by deferred tax assets of $1.7 million and a deferred tax asset valuation allowance of ($0.8) million against those assets. The valuation allowance has been established due to historical losses resulting in a Net Operating Loss Carryforward for each of the fiscal years 2010 through 2016 which may not be fully recognized due to an IRS Section 382 limitation related to a change in control occurring in fiscal year 2018. As of September 29, 2024 and October 1, 2023, we reviewed the deferred tax assets and determined it was more likely than not that we would be able to utilize a substantial portion of the deferred tax asset balance against future earnings. Our assumptions were based on the previous three years earnings trend as well as anticipated future earnings. During the twelve months ended September 29, 2024, the Company recognized a ($25) thousand tax benefit to deferred tax assets. During the twelve months ended October 1, 2023, the Company recognized $20 thousand in tax expenses to deferred tax assets. We will continue to review the deferred tax assets and related valuation reserves in accordance with ASC 740 on an annual basis.

 

The income tax provision for Optex Systems as of September 29, 2024 and October 1, 2023 differs from those computed using the statutory federal tax rate in the respective years due to the following permanent differences:

 

    2024     %     2023     %  
                         
Tax provision at statutory federal rate   $ 1,003       21     $ 574       21  
Nondeductible expenses     3       -       3       -  
Other temporary adjustments     14       -       (4 )     -  
Prior year federal income tax adjustment     (14 )     -       (35 )     (1 )
Change in deferred tax valuation allowance     -       -       (69 )     (3 )
Provision for income taxes, net   $ 1,006       21     $ 469       17  

 

Deferred income taxes recorded in the balance sheets result from differences between financial statement and tax reporting of income and deductions. A summary of the composition of the deferred income tax assets (liabilities) follows:

 

   

As of

September 29, 2024

    

As of

October 1, 2023

  
    (Thousands)  
    Deferred Tax Asset  
   

As of

September 29, 2024

    

As of

October 1, 2023

  
             
Stock Compensation   $ 177     $ 151  
Inventory Reserve     232       211  
Unicap     59       47  
Deferred Compensation     56       53  
Property and Equipment     (233 )     (212 )
Intangible Asset Amortization     10       -  
Contract Loss Reserve     54       51  
Accrued Paid Time Off     92       85  
Net Operating Losses     1,223       1,258  
Other     50       52  
Subtotal   $ 1,720     $ 1,696  
Valuation allowance     (773 )     (774 )
Net deferred asset   $ 947     $ 922  

 

The Company has a net loss carryforward of $5.8 million as of September 29, 2024 as compared to a net loss carryforward of $6.0 million as of October 1, 2023. Due to an IRS section 382 change in control limitation which was effective during the fiscal year ended 2017, it is anticipated that the Company may only realize $2.1 million of the current net operating loss carryforward for a net tax benefit of $0.4 million through fiscal year ending in 2037. Accordingly, a valuation allowance of $0.8 million is recorded as of September 29, 2024 and October 1, 2023.

 

 

The Company applied FASB ASC 740-10 and has no unrecognized tax benefits. By statute, the tax years ended September 29, 2024, October 1, 2023 and October 2, 2022 are open to examination by the major taxing jurisdictions to which the Company is subject.

 

During the twelve months ended September 29, 2024, the Company paid $1.2 million in income taxes. During the twelve months ended October 1, 2023 the Company paid $0.5 million in income taxes. As of September 29, 2024 the Company has recorded a tax liability of $74 thousand.