10. INCOME TAXES

12 Months Ended

Sep. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 10      INCOME TAXES

The Company’s provision (benefit) for income taxes consists of the following United States federal and state, and foreign components:

	For the Fiscal Years Ended
	September 30,
	2019			2018
Current:
Federal	$	(4,162	)	$	–
State		–			–
Foreign		–			–
Deferred:
Federal		(713,066	)		1,602,329
State		(127,140	)		152,603
Foreign		(45,471	)		9,234
		(889,839	)		1,764,166
Change in valuation allowance		885,677			(2,511,318	)
Income tax benefit	$	(4,162	)	$	(747,152	)

The deferred tax expense (benefit) is the change in the deferred tax assets and liabilities representing the tax consequences of changes in the amounts of temporary differences, net operating loss carryforwards and changes in tax rates during the fiscal year. The Company’s deferred tax assets and liabilities are comprised of the following:

	September 30,
	2019			2018
Deferred tax assets:
Net operating losses	$	2,310,746		$	1,919,260
Capital loss carryforwards		38,120			36,705
Share-based compensation		168,462			114,317
Alternative minimum tax credit		9,165			99,757
Excess tax over book basis in inventory		32,273			25,975
Reserves and other		534,444			28,938
Deferred rent		19,291			–
Accrued compensation		8,832			–
Accrued expenses		151,444			–
Depreciation		27,272			–
Charitable contributions		813			–
		3,300,862			2,224,952
Valuation allowance		(2,665,672	)		(1,602,725	)
Net deferred tax assets		635,190			622,227
Deferred tax liabilities:
Prepaid insurance		(140,951	)		(15,960	)
Intangible assets		(298,280	)		(324,572	)
481 Election (IPS)		(195,959	)		(248,570	)
Excess book over tax basis in fixed assets		–			(33,125	)
		(635,190	)		(622,227	)
Total	$	–		$	–

For the fiscal years ended September 30, 2019 and 2018, the Company recorded a provision for income taxes which includes a refund of $4,162 in the current year, and a deferred tax benefit of $747,000 in the prior year. The current year refund of $4,162 is related to a partial refund of prior year AMT tax.

At September 30, 2019, the Company had available net operating loss carryforwards (“NOLs”) for the U.S. federal income tax purposes of approximately $8,010,000. NOLs generated prior to 2018 expire beginning in 2031. NOLs generated after 2018 have an indefinite carryforward period. The net operating losses result in a deferred tax asset in respect of U.S. federal taxes of approximately $1,910,000. In addition, at September 30, 2019, the Company had net operating losses available to carry forward for foreign income tax purposes of approximately $3,815,000, resulting in a deferred tax asset of approximately $397,000, expiring through 2024. The Company has capital loss carryovers of approximately $160,000 expiring through 2020, resulting in deferred tax assets in respect of U.S. federal and state income taxes of approximately $38,000. Total net deferred tax assets, before valuation allowance, was approximately $2,888,000 and $2,225,000 at September 30, 2019 and 2018, respectively. Undistributed earnings of the Company's foreign subsidiaries are considered to be permanently reinvested; therefore, in accordance with accounting principles generally accepted in the United States of America, no provision for U.S. federal and state income taxes would result. In the fiscal year ended September 30, 2019, Forward Switzerland had a net loss of approximately $25,000, and Forward UK had a net loss of approximately $228,000.

As of September 30, 2019, as part of its periodic evaluation of the necessity to maintain a valuation allowance against its deferred tax assets, and after consideration of all factors, including, among others, projections of future taxable income, current year net operating loss carryforward utilization and the extent of the Company's cumulative losses in recent years, the Company determined that, on a more likely than not basis, it would not be able to use remaining deferred tax assets, except in respect of the United States income taxes in the event the Company elects to effect repatriation of certain foreign source income of its Swiss subsidiary, which income is currently considered to be permanently reinvested and for which no United States tax liability has been accrued. Accordingly, the Company has determined to maintain a full valuation allowance against its net deferred tax assets. As of September 30, 2019 and 2018, the valuation allowance was approximately $2,666,000 and $1,603,000, respectively. In the future, the utilization of the Company's NOLs may be subject to certain change of control limitations. If the Company determines that it will be able to use some or all of its deferred tax assets in a future reporting period, the adjustment to reduce or eliminate the valuation allowance would reduce its tax expense and increase after-tax income.

The significant elements contributing to the difference between the United States federal statutory tax rate and the Company’s effective tax rate are as follows:

	For the Fiscal Years Ended
	September 30,
	2019			2018
US federal statutory rate		21.0%			21.0%
State tax rate, net of federal benefit		2.8%			2.8%
Share-based compensation		0.0%			(2.2%	)
Foreign rate differential		1.4%			0.5%
Other		1.9%			2.6%
Change in tax credits		(0.1%	)		0.0%
Effect of federal tax rate change		0.0%			208.2%
Effect of repatriating Swiss earnings		0.0%			16.2%
Capital loss - expiration		0.0%			30.0%
Change in valuation allowance		(26.6%	)		(397.2%	)
Federal Alternative Minimum Taxes (AMT)		0.1%			0.0%
Permanent differences		(0.4%	)		0.0%
Income tax benefit		0.1%			(118.2%	)

As of September 30, 2019 and 2018, the Company has not accrued any interest and penalties related to uncertain tax positions. It is the Company's policy to recognize interest and/or penalties, if any, related to income tax matters in income tax expense in the consolidated statements of operations. For the periods presented in the accompanying consolidated statements of operations, no material income tax related interest or penalties were assessed or recorded. All fiscal years prior to the fiscal year ended September 30, 2016 are closed to federal and state examination.