Note 9 - Income Tax

6 Months Ended

Mar. 31, 2019

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 9 – Income Tax

The President of the United States signed into law H.R. 1 (the “Tax Reform Law”). The Tax Reform Law, effective for tax years beginning on or after January 1, 2018, except for certain provisions, resulted in significant changes to existing United States tax law, including various provisions that are expected to impact the Company. The Tax Reform Law reduces the federal corporate tax rate from 34% to 21% effective October 1, 2018 for the Company. The Company will continue to analyze the provisions of the Tax Reform Law to assess the impact on the Company’s CFS.

At March 31, 2019 and September 30, 2018, the Company had net operating loss (“NOL”) carryforward for income tax purposes; for federal income tax purposes, the NOL arising in tax years beginning after 2017 may only reduce 80% of a taxpayer’s taxable income, and may be carried forward indefinitely; for California income tax purposes, the entire NOL can be carried forward up to 20 years. The Company has NOL carry-forwards for Federal and California income tax purposes of $5.74 million and $5.63 million at March 31, 2019 and September 30, 2018, respectively. No tax benefit was reported with respect to these NOL carry-forwards in the accompanying CFS because the Company believes the realization of the Company’s net deferred tax assets for the NOL for both federal and California State of approximately $1.58 million as of March 31, 2019, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance.

Components of deferred tax assets as of March 31, 2019 and September 30, 2018 are as follows:

	March 31, 2019			September 30, 2018
Net deferred tax assets – Non-current:
Expected income tax benefit from NOL carry-forwards	$	1,577,406		$	1,571,957
Less valuation allowance		(1,577,406	)		(1,571,957	)
Deferred tax assets, net of valuation allowance	$	-		$	-

Income Tax Provision in the Statements of Operations

A reconciliation of the consolidated federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the six months ended March 31, 2019 and 2018 is as follows:

	2019			2018
Federal statutory income tax expense (benefit) rate		(21.00	)%		(34.00	)%
Federal income tax rate difference		-	%		19.00	%
State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax		(7.51	)%		(7.51	)%
California State minimum income tax		0.72	%		-	%
Change in valuation allowance on net operating loss carry-forwards		28.51	%		22.51	%
Effective income tax rate		0.72	%		0.00	%

A reconciliation of the consolidated federal statutory income tax rate and the effective income tax rate as a percentage of income before income taxes for the three months ended March 31, 2019 and 2018 is as follows:

	2019			2018
Federal statutory income tax expense (benefit) rate		(21.00	)%		(34.00	)%
Federal income tax rate difference		-	%		19.00	%
State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax		(7.51	)%		(7.51	)%
California State minimum income tax		1.64	%		-	%
Change in valuation allowance on net operating loss carry-forwards		28.51	%		22.51	%
Effective income tax rate		1.64	%		0.00	%