Annual report pursuant to Section 13 and 15(d)

Income Taxes

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

11.  INCOME TAXES

 

There was no provision for federal or state income taxes for the years ended September 30, 2019, 2018 and 2017 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 year ended September 30, 2018. There were no material differences 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, 2019, 2018 and 2017 due to the following:

 

    2019     2018     2017  
Computed "expected" tax benefit     (21.0 )%     (24.5 )%     (35.0 )%
Increase (decrease) in income taxes resulting from:                        
State taxes, net of federal benefit     (6.3 )%     (6.0 )%     (5.2 )%
Permanent differences     0.1 %     0.0 %     1.3 %
Increase in the valuation reserve     27.2 %     30.5 %     38.9 %
      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,
2019
    September 30,
2018
 
Deferred tax assets:            
Net operating loss carryforward   $ 10,994,000     $ 8.962,000  
Stock-based compensation     1,133,000       1,350,000  
Other     1,202,000        
Valuation allowance     (13,329,000 )     (10,312,000 )
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, 2019 and 2018, the valuation allowance increased by $3,017,000 and $1,764,000, respectively. The increase in the valuation allowance during the years ended September 30, 2019 and 2018 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, 2019, the Company has a net operating loss carryforward of approximately $49,291,000 which begins expiring in 2034.

 

As of September 30, 2019, the Company also has federal research and development credits of $852,000 to offset future income taxes. The tax credit carryforwards will begin to expire in 2036.

 

The Company accounts for uncertain tax positions in accordance with the guidance provided in ASC 740, "Accounting for Income Taxes." This guidance describes a recognition threshold and measurement attribute for the financial statement disclosure of tax positions taken or expected to be taken in a tax return and requires recognition of tax benefits that satisfy a more-likely-than-not threshold. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods and disclosure. There have been no reserves for uncertain tax positions recorded by the Company to date.