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8. INCOME TAXES | 12 Months Ended
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Sep. 30, 2017
Income Tax Disclosure [Abstract] |
8. INCOME TAXES | At September 30, 2017 and 2016, the Company had federal net operating loss carryforwards of approximately $187.8 million and $169.7 million, respectively. The NOLs begin to expire during the fiscal year ending September 30, 2019 and become fully expired by the end of the fiscal year ended 2037. In addition, the Company has a general business credit as a result of the credit for increasing research activities (“R&D credit”) of approximately $1.2 million at September 30, 2017 and 2016. The R&D credit begins to expire during the fiscal year ending September 30, 2020 and is fully expired during the fiscal year ended 2029. Deferred taxes consisted of the following at September 30:
| 2017 | 2016
Net operating loss carryforwards | $ | 70,752,000 | $ | 64,366,000
R&D credit | 1,221,000 | 1,221,000
Stock-based compensation | 6,292,000 | 6,379,000
Capitalized R&D | 21,160,000 | 18,508,000
Vacation and other | 121,000 | 179,000
Total deferred tax assets | 99,546,000 | 90,653,000
Fixed assets and intangibles | (523,000) | (49,000)
Total deferred tax liability | (523,000) | (49,000)
Net deferred tax asset | 99,023,000 | 90,604,000
Valuation allowance | (99,023,000) | (90,604,000)
Ending Balance | $ | - | $ | -
In assessing the realization of deferred tax assets, management considered whether it was more likely than not that some, or all, of the deferred tax asset will be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income. Management has considered the history of the Company’s operating losses and believes that the realization of the benefit of the deferred tax assets cannot be reasonably assured. In addition, under Internal Revenue Code Section 382, the Company’s ability to utilize these net operating loss carryforwards may be limited or eliminated in the event of future changes in ownership. The Company has no federal or state current or deferred tax expense or benefit. The Company’s effective tax rate differs from the applicable federal statutory tax rate. The reconciliation of these rates is as follows at September 30:
| 2017 | 2016
Federal Rate | 34.00% | 34.00%
State tax rate, net of federal benefit | 6.44 | 3.92
State tax rate change | (3.91) | (22.00)
Other adjustments | (3.39) | (0.03)
Permanent differences (1) | 25.49 | 44.90
Change in valuation allowance | (58.63) | (60.79)
Effective tax rate | 0.00% | 0.00%
(1) Primarily due to the approximate $11 million and $14 million gain on derivative instruments from the change in fair value of the Company’s warrant liabilities during the years ended September 30, 2017 and 2016, respectively. |
The Company applies the provisions of ASC 740, “Accounting for Uncertainty in Income Taxes,” which requires financial statement benefits to be recognized for positions taken for tax return purposes when it is more likely than not that the position will be sustained. The Company has elected to reflect any tax penalties or interest resulting from tax assessments on uncertain tax positions as a component of tax expense. The Company has generated federal net operating losses in tax years ending September 30, 1998 through 2016. These years remain open to examination by the major domestic taxing jurisdictions to which the Company is subject.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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