6. INCOME TAXES

12 Months Ended

Sep. 30, 2014

Income Tax Disclosure [Abstract]

6. INCOME TAXES

6. INCOME TAXES

At September 30, 2014, the Company had a federal net operating loss carryforward of approximately $141 million, which begins to expire during the fiscal year ended in 2018 and is fully expired by the end of the fiscal year ended 2034. 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, 2014, which begins to expire during the fiscal year ended 2020 and is fully expired during the fiscal year ended 2029. At September 30, 2013, the Company had a federal net operating loss carryforward of approximately $130 million and an R&D credit of approximately $1.2 million. Deferred taxes at September 30 consisted of the following:

	2014			2013
Net operating loss carryforwards	$	55,229,799		$	50,485,248
R&D credit		1,221,487			1,221,487
Stock-based compensation		4,054,450			3,323,353
Fixed assets and intangibles		26,329			-
Capitalized R&D		9,897,041			5,542,816
Vacation and other		108,891			270,121
Total deferred tax assets		70,537,997			60,843,025
Fixed assets and intangibles		-			(1,968	)
Total deferred tax liabilities		-			(1,968	)
Valuation allowance		(70,537,997	)		(60,841,057	)
Net deferred tax asset	$	-		$	-

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.

Certain net deferred tax liabilities at September 30, 2013, totaling approximately $6.3 million were reversed, with the offsetting adjustment increasing deferred tax allowances. These adjustments had no effect on the Company’s financial position or operating results.

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 for the three years ended September 30, 2014 is as follows:

	2014			2013			2012
Federal Rate		34.00	%		34.00	%		34.00	%
State tax rate, net of federal benefit		5.15			4.97			5.21
State tax rate change		0.93			(3.77	)		18.07
Other adjustments		0.00			0.00			(0.53	)
Expired tax attributes		0.00			(87.87	)		(33.54	)
Adjustment to deferreds		19.13			14.30			0.00
Permanent differences		(0.43	)		(1.59	)		(0.68	)
Change in valuation allowance		(58.78	)		39.96			(23.53	)
Effective tax rate		0.00	%		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 tax return years 2009 through 2013 remain open to examination by the major domestic taxing jurisdictions to which the Company is subject.