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8. INCOME TAXES | 12 Months Ended
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Sep. 30, 2018
Income Tax Disclosure [Abstract] |
8. INCOME TAXES | At September 30, 2018 and 2017, the Company had net deferred tax assets of $24.8 million and $99.0 million, respectively. Due to uncertainties surrounding the Company’s ability to generate future taxable income to realize these assets, a full valuation allowance has been established to offset the net deferred tax assets. 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. Pursuant to Section 382 of the Internal Revenue Code, or IRC, annual use of the Company’s net operating loss (NOL) carryforwards may be limited in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company determined that because of various stock issuances used to finance its operations, an ownership change as defined in the provisions of Section 382 of the IRC occurred on February 5, 2018. Such ownership change resulted in annual limitations on the utilization of tax attributes, including NOL carryforwards and tax credits. The Company estimates that $188.9 million of its NOL carryforwards were effectively eliminated under Section 382 for federal income tax purposes. A portion of the remaining NOL carryforwards limited by Section 382 will become available each year. As a result of the Section 382 estimated analysis completed during 2018, the Company has included $18.6 million in the deferred tax asset schedule, which is the deferred tax asset relating to the unlimited portion of the NOL carryforwards. The Company’s Section 382 estimated analysis was completed through September 30, 2018. If additional changes in ownership occur subsequent to year end, additional NOL and tax credit carryforwards could be eliminated or restricted. If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance. T he Company had federal NOL carryforwards of approximately $18.6 million and $187.8 million at September 30, 2018 and 2017, respectively. The NOL carryforwards begin to expire during the year ended September 30, 2020 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, 2018 and 2017. The R&D credit begins to expire during the year ended September 30, 2020 and becomes fully expired during the fiscal year ended 2029. Significant components of the Company’s deferred tax assets as of September 30, 2018 and 2017 are listed below:
|  | 2018 |  |  | 2017 |
NOL carryforwards |  | $ | 5,052,000 |  |  | $ | 70,752,000 |
R&D credit |  |  | 1,221,000 |  |  |  | 1,221,000 |
Stock-based compensation |  |  | 3,097,000 |  |  |  | 6,292,000 |
Capitalized R&D |  |  | 15,518,000 |  |  |  | 21,160,000 |
Vacation and other |  |  | 544,000 |  |  |  | 121,000 |
Total deferred tax assets |  |  | 25,432,000 |  |  |  | 99,546,000 |
Fixed assets and intangibles |  |  | (634,000 | ) |  |  | (523,000 | )
Total deferred tax liability |  |  | (634,000 | ) |  |  | (523,000 | )
Net deferred tax asset |  |  | 24,798,000 |  |  |  | 99,023,000 |
Valuation allowance |  |  | (24,798,000 | ) |  |  | (99,023,000 | )
Ending Balance |  | $ | - |  |  | $ | - |
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 for the years ended September 30:
|  | 2018 |  |  | 2017 |
Federal Rate |  |  | 24.28 | % |  |  | 34.00 | %
Federal rate change |  |  | (88.94 | ) |  |  | - |
State tax rate, net of federal benefit |  |  | 4.47 |  |  |  | 6.44 |
State tax rate change |  |  | - |  |  |  | (3.91 | )
Net operating loss – write-off |  |  | (161.21 | ) |  |  | - |
Other adjustments |  |  | (5.95 | ) |  |  | (3.39 | )
Permanent differences |  |  | (5.79 | ) |  |  | 25.49 |
Change in valuation allowance |  |  | 233.14 |  |  |  | (58.63 | )
Effective tax rate |  |  | 0.00 | % |  |  | 0.00 | %
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 2017. These years remain open to examination by the major domestic taxing jurisdictions to which the Company is subject. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "Act" or "Tax Reform"). Among other changes, the Act reduces the current corporate federal income tax rate from 35% to 21% effective January 1, 2018. As deferred tax assets and deferred tax liabilities are measured using the tax rates expected to apply to taxable income in the years during which the temporary differences are anticipated to be recovered or settled, the Company determined that it was necessary to revalue its deferred tax assets and deferred tax liabilities as of December 31, 2017.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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