Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.20.4
Income Taxes
12 Months Ended
Sep. 30, 2020
Income Taxes [Abstract]  
INCOME TAXES

11. INCOME TAXES

 

There was no provision for federal or state income taxes for the years ended September 30, 2020 and 2019 due to the Company's operating losses and the valuation reserve on deferred tax assets.

 

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, 2020 and 2019 due to the following:

 

    2020     2019  
Computed "expected" tax benefit     (21.0 )%     (21.0 )%
Increase (decrease) in income taxes resulting from:                
State taxes, net of federal benefit     (6.3 )%     (6.3 )%
Permanent differences     0.7 %     0.1 %
Increase in the valuation reserve     26.6 %     27.2 %
      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,
2020
    September 30,
2019
 
Deferred tax assets:                
Net operating loss carryforward   $ 14,498,000     $ 10,994,000  
Stock-based compensation     915,000       1,133,000  
Other     1,507,000       1,202,000  
Valuation allowance on deferred tax assets     (16,920,000 )     (13,329,000 )
Total deferred tax assets            
Deferred tax liabilities:                
In-process research and development     (4,985,800 )     (4,985,800 )
Total deferred tax liability     (4,985,800 )     (4,985,800 )
Net deferred tax liability   $ (4,985,800 )   $ (4,985,800 )

 

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, 2020 and 2019, the valuation allowance increased by $3,591,000 and $3,017,000, respectively. The increase in the valuation allowance during the years ended September 30, 2020 and 2019 was primarily due to the Company's net operating loss. At September 30, 2020, the Company has a federal net operating loss carryforward of approximately $65,000,000 which begins expiring in 2034.

 

As of September 30, 2020, the Company also has federal research and development credits of $1,055,000 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.