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INCOME TAXES | 12 Months Ended
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Sep. 30, 2021
INCOME TAXES |
7. INCOME TAXES |
7. | INCOME TAXES
| At September 30, 2021 and 2020, the Company had net deferred tax assets of $44.1 million and $35.5 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. Such ownership change could result in annual limitations on the utilization of tax attributes, including NOL carryforwards and tax credits. The Company performed an estimated analysis to determine if any additional ownership changes for the year ended September 30, 2021 occurred and no such shifts were identified. If changes in ownership occur after year end, 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.
| The Company had federal NOL carryforwards of approximately $77.1 million and $51.5 million at September 30, 2021 and 2020, respectively. Approximately $19.2 million of the NOL carryforwards begin to expire during the year ended September 30, 2022 and become fully expired by 2038 and approximately $57.9 million of NOL carryforwards, which were generated post Tax Cuts and Jobs Act, have an indefinite life. 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, 2021 and 2020. The R&D credit expires during the fiscal year ended 2029.
| Significant components of the Company’s deferred tax assets as of September 30, 2021 and 2020 are listed below:
|  | 2021 |  |  | 2020 |
NOL carryforwards |  | $ | 19,789,000 |  |  | $ | 13,407,000 |
Lease liabilities |  |  | 4,101,000 |  |  |  | 3,631,000 |
R&D credit |  |  | 1,221,000 |  |  |  | 1,221,000 |
Stock-based compensation |  |  | 7,785,000 |  |  |  | 5,297,000 |
Capitalized R&D |  |  | 15,040,000 |  |  |  | 15,853,000 |
Vacation and other |  |  | 126,000 |  |  |  | 125,000 |
Total deferred tax assets |  |  | 48,062,000 |  |  |  | 39,534,000 |
Right of use assets |  |  | (3,786,000 | ) |  |  | (3,911,000 | )
Fixed assets and intangibles |  |  | (172,000 | ) |  |  | (169,000 | )
Total deferred tax liability |  |  | (3,958,000 | ) |  |  | (4,080,000 | )
Net deferred tax asset |  |  | 44,104,000 |  |  |  | 35,454,000 |
Valuation allowance |  |  | (44,104,000 | ) |  |  | (35,454,000 | )
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:
|  | 2021 |  |  | 2020 |
Federal Rate |  |  | 21.00 | % |  |  | 21.00 | %
State rate change |  |  | (1.37 | ) |  |  | (1.40 | )
State tax rate, net of federal benefit |  |  | 4.72 |  |  |  | 5.15 |
Other adjustments |  |  | (0.79 | ) |  |  | (3.24 | )
Permanent differences |  |  | 0.23 |  |  |  | 0.42 |
Change in valuation allowance |  |  | (23.79 | ) |  |  | (21.93 | )
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, 1999 through 2021. The Company files income tax returns in the U.S. federal jurisdiction and various states. With few exceptions, the Company is no longer subject to U.S. federal and state income tax examinations by tax authorities for years before September 30, 2018.

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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/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=116825942&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=84230637&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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