INCOME TAXES

12 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE I– INCOME TAXES

The income tax provision (benefit) for the fiscal years ended September 30, 2017 and 2016 consists of the following:

	2017			2016
Federal:
Current	$	-			-
Deferred		(4,303,000	)		(3,780,000	)
		(4,303,000	)		(3,780,000	)
State and local:
Current		-			-
Deferred		(376,000	)		(1,302,000	)
		(376,000	)		(1,302,000	)
Change in valuation allowance		4,679,000			5,082,000
Income tax provision (benefit)	$	-			-

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S statutory rate to losses before income tax expense for the years ended September 30, 2017 and 2016 as follows:

	2017			2016
Statutory federal income tax rate		34.00	%		34.00	%
Statutory state and local income tax rate (1%, as of September 30, 2017 and 2016), net of federal benefit		1.62	%		7.72	%
Stock based compensation		(2.65	)%		(2.33	)%
Other permanent differences		(0.03	)%		0.72	%
Effect of change in deferred tax rate		2.37	%		2.01	%
Adjustment of prior years’ NOLs		0.38	%		0.41	%
Adjustment to depreciation and amortization		-			1.09	%
Adjustment to stock based compensation		-			(2.43	)%
Adjustment to state tax credits		0.70	%		0.55	%
Change in valuation allowance		(36.39	)%		(41.74	)%
Effective tax rate		0.00	%		0.00	%

Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and for tax purposes. The tax effect of these temporary differences representing deferred tax asset and liabilities result principally from the following:

	September 30,
	2017			2016
Deferred tax assets (liabilities):
Stock based compensation	$	2,836,000		$	2,025,000
Depreciation and amortization		500,000			351,000
Amortization of debt discount		16,311,000			16,269,000
Net operating loss carry forward		16,143,000			12,713,000
Tax credits		521,000			221,000
Other		52,000			105,000
Less: valuation allowance		(36,363,000	)		(31,684,000	)
Net deferred tax asset	$	-		$	-

As of September 30, 2017, the Company has approximately $43,440,000 of Federal and $57,896,000 of State net operating loss “NOL” carryforwards available which begin to expire after 2022. Pursuant to Internal Revenue Code Section 382, the Company’s ability to utilize the NOLs is subject to certain limitations due to changes in stock ownership in prior years. The annual limitation ranges between $786,000 and $1,103,000 and any unused amounts can be carried forward to subsequent years.

The Company has provided a full valuation allowance against all of the net deferred tax assets based on management’s determination that it is more likely than not that the net deferred tax assets will not be realized in the future. The valuation allowance increased by $4,679,000.

The Company has Federal research and development credits of approximately $381,000 that will expire after 2034. The Company also has state investment tax credits of $140,000 that will expire after 2029.