Note 13 - Income Taxes

For the years ended June 30, 2026, and 2025, there was insignificant income tax expense and $0.4 million of income tax expense from continuing operations, which was an effective tax rate of negative 0.1% and negative 3.2%, respectively. This income tax expense was primarily driven by Section 382 limitation of the IRC on pre-Tax Cuts and Jobs Act (the “TCJA”) and post-TCJA net operating loss (“NOL”) utilization, as further described below, coupled with existing valuation allowances. As of  June 30, 2026, and 2025, the Company had $0.2 million and $0.3 million of deferred tax assets (“DTAs”), net of valuation allowance from continuing operations, respectively, included in other non-current assets and $0.2 million and $0.3 million of deferred tax liabilities (“DTLs”) from continuing operations, respectively, included in other non-current liabilities. As of June 30, 2026, and 2025, the Company had $1.3 million and $1.1 million of prepaid income taxes included in prepaid expenses and other current assets recorded in the Company's consolidated balance sheets.  

Section 382 Limitation

Under the provisions of the IRC, substantial changes in the Company’s ownership have resulted in limitations on the amount of NOL carryforwards that can be utilized in future years. NOL carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOLs generated as such NOLs are utilized.

As part of the Company’s Section 382 analysis, an ownership change was determined to have occurred in March 2022 at a point in time when the Company had a net unrealized built-in gain. As such, the NOL generated during that period has been allocated and the post-change NOL (approximately $12 million) was determined to be fully available to offset fiscal 2023 pre-change income subject to the 80% limitation. The Company also determined that an ownership change occurred in June 2023 at a time when the Company was in a net unrealized built-in loss position. As a result of the Section 382 analysis, the Company had $10.5 million of cumulative disallowed recognized built-in losses that were carried forward as a net operating loss as of  June 30, 2025. These operating loss carryovers are subject to the June 2023 Section 382 limitation.

The Company had federal net operating losses of $452.2 million as of  June 30, 2026, which are subject to limitation (as described above). Of the available federal net operating losses, $163.4 million can be carried forward indefinitely, and $288.8 million will completely expire in 2037 as a result of the ownership change. As of  June 30, 2026, the Company had research and development credits of $2.9 million, which began to expire in 2025 and are also subject to the Section 382 limitation. The available state net operating losses, if not utilized to offset taxable income in future periods, began to expire in 2025 and will completely expire in 2041.

As of June 30, 2026, the Company had various state NOL carryforwards. The determination of the state NOL carryforwards is dependent on apportionment percentages and state laws that can change from year to year and impact the amount of such carryforwards.

The Company notes there is diversity in practice regarding the treatment of deductions or loss carryforwards that are expected to expire unutilized. Generally, it is not appropriate to use zero as an applicable tax rate and rather, a DTA should be recorded at the applicable tax rate and a valuation of an equal amount would be provided. However, under certain circumstances it may be appropriate to follow an alternative approach and use a zero rate to write off the asset against the valuation allowance, reducing the valuation allowance and gross DTAs disclosed. The Company considered both accounting viewpoints and determined it would present its NOL carryforwards gross with a full valuation allowance and not apply a zero rate to NOL carryforwards expected to expire unutilized.

In review of the Company’s consolidated deferred position, excluding NOLs and other tax attributes, the Company is in a net DTA position and therefore all NOLs are being fully valued and not utilized against a net DTL.

The provision for income taxes consisted of the following:

Income tax expense resulting from applying statutory rates in jurisdictions in which the Company is taxed (federal and various states) differs from the income tax expense in the consolidated financial statements. A reconciliation of the United States federal statutory income tax rates to the Company’s effective tax rate is as follows.

For the year ended June 30, 2026, state taxes in Tennessee and Texas made up the majority (greater than 50%) of the state income taxes, net of federal benefit. 

Deferred income taxes arise from temporary differences in the recognition of certain items for income tax and financial reporting purposes. The approximate tax effects of significant temporary differences, which comprise the deferred tax assets and liabilities, are as follows:

The Company has recorded a valuation allowance of $123.7 million and $136.6 million as of  June 30, 2026, and 2025, respectively, to reserve its net DTAs. In assessing the realizability of DTAs, management considers whether it is more likely than not that some portion or all of the DTAs will not be realized. The ultimate realization of DTAs is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, carryback opportunities and tax planning strategies in making the assessment. The Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowance provided.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. The Company has no accrued interest related to its uncertain tax positions as they all relate to timing differences that would adjust the Company’s NOL, interest expense carryover or research and development credit carryover and therefore do not require recognition. As a result of these timing differences, as of  June 30, 2026, and 2025 the Company had gross unrecognized tax benefits related to uncertain tax positions of $0.5 million and $0.5 million, respectively. Changes in unrecognized benefits in any given year are recorded as a component of deferred tax expense.

A tabular roll-forward of the Company’s gross unrecognized tax benefit related to uncertain tax positions is below.

The change in the Company’s gross unrecognized tax benefits relates to filed method changes with the IRS for the tax return year ending June 30, 2025. Additionally, certain of the Company’s acquired legal entities pre-acquisition tax years are subject to the same general statute of limitations, resulting in its tax years back to 2005 being subject to examination.

The income tax expense (benefit) allocated to continuing operations and discontinued operations for the years ended June 30, 2026, and 2025, were as follows:

See Note 20 - Discontinued Operations for further detail on the Company’s discontinued operations related to the wind down and divestiture of its Consumer Health business.

For the year ended June 30, 2026, cash payments for income taxes of $211 thousand included $69 thousand paid to Tennessee, $48 thousand paid to North Carolina, $29 thousand paid to Georgia, $16 thousand paid to Florida, $10 thousand paid to Texas, and $39 thousand paid to all other jurisdictions.

The One Big Beautiful Bill Act

The enactment of the One Big Beautiful Bill Act (the “OBBBA”) includes significant provisions, such as the permanent extension of certain expiring provisions of the TCJA, allowing for accelerated tax deductions for qualified property and research expenditures, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in calendar year 2025 and others implemented through calendar year 2027. The income tax provision considers the impacts to the Company’s deferred tax assets and liabilities on the consolidated balance sheet as of  June 30, 2026, including deferred tax assets for interest, fixed assets and section 174 capitalization.