INCOME TAXES

12 Months Ended

Sep. 30, 2018

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE J– INCOME TAXES

The income tax provision (benefit) for the fiscal years ended September 30, 2018 and 2017 consists of the following:

	2018			2017
Federal:
Current	$	-			-
Deferred		4,430,000			(4,303,000	)
		4,430,000			(4,303,000	)
State and local:
Current		-			-
Deferred		(925,000	)		(376,000	)
		(925,000	)		(376,000	)
Change in valuation allowance		(3,505,000	)		4,679,000
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, 2018 and 2017 as follows:

	2018			2017
Statutory federal income tax rate		24.28	%		34.00	%
Statutory state and local income tax rate (1%, as of September 30, 2018 and 2017), net of federal benefit		2.50	%		1.62	%
Stock based compensation		(2.29	%)		(2.65	%)
Other permanent differences		4.24	%		3.42	%
Impact of change in Federal statutory tax rate		(58.71	%)		-	%
Change in valuation allowance		29.98	%		(36.39	%)
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,
	2018			2017
Deferred tax assets (liabilities):
Stock based compensation	$	1,947,000		$	2,836,000
Depreciation and amortization		339,000			500,000
Net operating loss carry forward		13,248,000			16,143,000
Tax credits		944,000			521,000
Other		69,000			52,000
Less: valuation allowance		(16,547,000	)		(20,052,000	)
Net deferred tax asset	$	-		$	-

As of September 30, 2018, the Company has approximately $53,619,000 of Federal and $73,236,000 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 decreased by $3,505,000.

Additionally, deferred tax asset at September 30, 2017 has been revised as follows: deferred tax asset related to amortization of debt discounts is decreased by $16,311,000; the valuation allowance decreased by $16,311,000, completely offsetting the increase in the deferred tax assets. The revision resulted in no change to the net tax provision of the Company as of September 30, 2017 and for the fiscal year ended.

The Company has Federal research and development credits of approximately $597,000 that will begin to expire after 2034. The Company also has state investment tax credits of $340,000 that will begin to expire after 2029.