Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
12 Months Ended
Sep. 30, 2019
Income Tax Disclosure [Abstract]  
INCOME TAXES

NOTE 5 – INCOME TAXES 

 

The provision for income taxes consists of the following for the years ended September 30, 2019 and 2018:

      2019       2018  
FEDERAL                
Current   $     $  
Deferred            
STATE                
Current            
Deferred            
TOTAL PROVISION   $     $  

 

The difference between the actual income tax provision versus tax computed at the statutory rate is as follows for the years ended September 30, 2019 and 2018, respectively:

 

    2019     2018  
Expected provision (based on statutory rate of 21%)   $ (2,881,988)     $ (553,714)  
Effect of:                
Increase in valuation allowance     2,879,685       2,696,631  
Non-deductible expense     500,638       53,493  
Rate change           (2,305,270)  
Other, net     (498,335)       108,860  
Total actual provision   $     $  

 

The Company does not have any material uncertain tax positions. The Company’s policy is to recognize interest and penalties accrued related to unrecognized tax benefits as a component of income tax expense (benefit). For the years ended September 30, 2019 and 2018, the Company did not recognize any interest or penalties, nor did we have any interest or penalties accrued as of September 30, 2019 and 2018 relating to unrecognized benefits. Deferred income tax assets and liabilities at September 30, 2019 and 2018, respectively, consist of the following:

 

    2019     2018  
DEFERRED TAX ASSETS (LIABILITIES)                
Net operating losses   $ 10,295,547     $ 7,131,636  
Exploration costs     (1,110,135 )     (1,503,472 )
Oil and natural gas leases     2,336,776       2,192,654  
IDC     (1,036,737 )      
Partnership ordinary loss     (178,359 )      
Stock based compensation     567,406       411,287  
Accrued interest and expenses not paid     386,685       271,190  
Derivative financial instrument     69,120       (57,059 )
Differences in book/tax depreciation     9,191       13,573  
Net deferred tax asset   $ 11,339,494     $ 8,459,809  
Valuation allowance     (11,339,494 )     (8,459,809 )
NET DEFERRED TAXES   $     $  

 

The Company’s valuation allowance increased $2,879,685 during the year ended September 30, 2019 and increased $2,696,633 during the year ended September 30, 2018.

 

At September 30, 2019, the Company had approximately $49 million of NOLs, approximately 66% of which will expire from 2032 to 2038. Approximately $33.4 million of the Company’s NOLs are allowable as a deduction against 100 percent of future taxable income since they were generated prior to the effective date of limitations imposed by the TCJA.

 

The tax years ended September 30, 2016 through 2019 are open for examination for federal income tax purposes and by other major taxing jurisdictions to which we are subject.