Annual report pursuant to Section 13 and 15(d)

Income Taxes

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Income Taxes
12 Months Ended
Sep. 30, 2018
Income Tax Disclosure [Abstract]  
INCOME TAXES

12.  INCOME TAXES

 

There was no provision for federal or state income taxes for the years ended September 30, 2018, 2017 and 2016 due to the Company’s operating losses and a full valuation reserve on deferred tax assets.

 

On December 22, 2017, the Tax Cuts and Jobs Act (the “Act”), was signed into law by the President of the United States. The Act includes a number of changes, including the lowering of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018, and the establishment of a territorial-style system for taxing foreign-source income of domestic multinational corporations. The Company has recognized provisional tax impacts related to the revaluation of the Company’s deferred tax assets and the impact of revaluation of those deferred tax assets on the Company’s valuation allowance and included those amounts in the consolidated financial statements for the year ended September 30, 2018. The actual impact of the Act may differ from the Company’s estimates due to, among other things, changes in interpretations and assumptions made and guidance that may be issued as a result of the Tax Act.

 

The income tax benefit differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income for the years ended September 30, 2018, 2017 and 2016 due to the following:

 

    2018     2017     2016  
Computed “expected” tax benefit     (24.5 %)     (35.0 %)     (35.0 %)
Increase (decrease) in income taxes resulting from:                        
State taxes, net of federal benefit     (6.0 %)     (5.2 %)     (5.2 %)
Permanent differences     0.0 %     1.3 %     4.2 %
Increase in the valuation reserve     30.5 %     38.9 %     36.0 %
      0.0 %     0.0 %     0.0 %

  

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:

 

    September 30,
2018
    September 30,
2017
 
Deferred tax assets:                
Net operating loss carryforward   $ 8,962,000     $ 7,123,000  
Stock-based compensation     1,350,000       1,425,000  
Valuation allowance     (10,312,000 )     (8,548,000 )
Deferred tax assets   $     $  

 

The Company has recorded a valuation allowance against deferred tax assets as the utilization of the net operating loss carryforward and other deferred tax assets is uncertain.  During the years ended September 30, 2018, 2017 and 2016, the valuation allowance increased by $1,764,000, $4,044,000 and $2,989,000, respectively. The increase in the valuation allowance during the years ended September 30, 2018, 2017 and 2016 was primarily due to the Company’s net operating loss offset by the decrease in the effective U.S. federal income tax rate from 35% to 21%. At September 30, 2018, the Company has a net operating loss carryforward of approximately $29,344,000 which begins expiring in 2034.