Annual report pursuant to Section 13 and 15(d)

18. Income Taxes

v3.6.0.2
18. Income Taxes
12 Months Ended
Sep. 30, 2016
Notes  
18. Income Taxes

18.                Income Taxes

As of September 30, 2016, the Company had net operating loss carryforwards available to offset future taxable income, if any, of approximately $89,295,000, which will begin to expire in 2027.  The utilization of the net operating loss carryforwards is dependent upon the tax laws in effect at the time the net operating loss carryforwards can be utilized.  The Internal Revenue Code contains provisions that likely could reduce or limit the availability and utilization of these net operating loss carryforwards.  For example, limitations are imposed on the utilization of net operating loss carryforwards if certain ownership changes have taken place or will take place.  The Company will perform an analysis to determine whether any such limitations have occurred as the net operating losses are utilized.

 

The amount and ultimate realization of the benefits from the net operating loss carryforwards are dependent, in part, upon the tax laws in effect, the Company’s future earnings, and other future events, the effects of which cannot be determined.  The Company has established a valuation allowance against all deferred income tax assets not offset by deferred income tax liabilities due to the uncertainty of their realization.  Accordingly, there is no benefit for income taxes in the accompanying statements of operations. 

Deferred income taxes are determined based on the estimated future effects of differences between the consolidated financial reporting and income tax reporting bases of assets and liabilities given the provisions of currently enacted tax laws and the tax rates expected to be in place. 

The deferred income tax assets (liabilities) were comprised of the following as of September 30:

 

 

 

2016

 

 

2015

 

Net operating loss carryforwards

$

33,307,000

 

$

29,000,000

 

Depreciation, amortization and reserves

 

442,000

 

 

721,000

 

Stock-based compensation

 

1,619,000

 

 

1,728,000

 

Accrued vacation

 

23,000

 

 

28,000

 

Valuation allowance

 

(35,391,000

)

 

(31,477,000

)

Total

$

-

 

$

-

 

 

Reconciliations between the benefit for income taxes at the federal statutory income tax rate and the Company’s benefit for income taxes for fiscal 2016 and 2015 were as follows:

 

 

 

2016

 

 

2015

 

Federal income tax benefit at statutory rate

$

3,102,000

 

 

$

3,919,000

 

State income tax benefit, net of federal income

tax effect

 

300,000

 

 

 

380,000

 

Permanent differences

 

498,000

 

 

 

(367,000

)

Other

 

14,000

 

 

 

112,000

 

Change in valuation allowance

 

(3,914,000

)

 

 

(4,044,000

)

Benefit for income taxes

$

-

 

 

$

-

 

 

During fiscal 2016 and 2015, the Company recognized no interest or penalties, and there were no changes in unrecognized tax benefits from tax positions taken or from lapsed statutes of limitations.  There were no settlements with taxing authorities.  As of September 30, 2016, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate, and there are no positions that are anticipated to significantly increase or decrease.  The Company had no tax examinations beginning, ending, or remaining in process as of and for the years ended September 30, 2016 and 2015.  Tax returns for fiscal years subsequent to 2012 remain subject to examination.