Income Tax

6 Months Ended

Mar. 31, 2021

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 8 – Income Tax

At March 31, 2021 and September 30, 2020, the Company had accumulated net operating loss (“NOL”) carryforwards for income tax purposes. For federal income tax purposes, the NOLs 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. However, the coronavirus Aid, Relief and Economic Security Act (“the CARES Act”) issued in March 2020, provides tax relief to both corporate and noncorporate taxpayers by adding a five-year carryback period and temporarily repealing the 80% limitation for NOLs arising in 2018, 2019 and 2020. The Company estimated NOL carry-forwards for Federal and California income tax purposes of $4.39 million and $4.36 million at March 31, 2021 and September 30, 2020, 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 $1.23 million as of March 31, 2021, 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, 2021 and September 30, 2020 are as follows:

	March 31, 2021			September 30, 2020
Net deferred tax assets:
Expected income tax benefit from NOL carry-forwards	$	1,228,139		$	1,218,780
Lease expense under ASU 842		495			390
Less valuation allowance		(1,228,634	)		(1,219,170	)
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, 2021 and 2020 is as follows:

	2021			2020
Federal statutory income tax expense (benefit) rate		(21.00	)%		(21.00	)%
Federal income tax rate difference		0.00	%		0.00	%
Permanent difference		0.99	%		0.00	%
State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax		(6.97	)%		(6.98	)%
Change in valuation allowance on net operating loss carry-forwards		34.68	%		40.54	%
Effective income tax rate		7.70	%		12.56	%

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 three months ended March 31, 2021 and 2020 is as follows:

	2021			2020
Federal statutory income tax expense (benefit) rate		21.00	%		(21.00	)%
Federal income tax rate difference		0.00	%		0.00	%
Permanent difference		0.36	%		0.00	%
State statutory income tax (benefit) rate, net of effect of state income tax deductible to federal income tax		6.98	%		(6.98	)%
Change in valuation allowance on net operating loss carry-forwards		(23.42	)%		87.50	%
Effective income tax rate		4.92	%		59.52	%