5.	INCOME TAXES

For the fiscal years ended September 30, 2013, 2012 and 2011 the income tax provision (benefit) was as follows:


	2013		2012			2011
Federal—current	$	—	$	(4,808	)	$	—
State—current		1,076		800			2,492

Total	$	1,076	$	(4,008	)	$	2,492

Significant components of the Company’s net deferred tax assets and liabilities as of September 30, 2013 and 2012 are as follows:


	2013			2012
Deferred tax assets (liabilities):
Net operating loss carryforwards	$	10,473,905		$	8,428,034
Capitalized research and development costs		134,550			336,475
Stock based compensation		408,588			380,989
Prepaid License Fees		—			4,641
AMT credit carryforwards		66,320			66,320
Other		186,212			78,620
Research credit carryforwards		43,802			49,310

Total deferred assets		11,313,377			9,344,389
Valuation allowance for net deferred tax assets		(11,313,377	)		(9,344,389	)

Total	$	—		$	—

The Company has provided a valuation allowance against deferred tax assets recorded as of September 30, 2013 and 2012 due to uncertainties regarding the realization of such assets.

The net change in the total valuation allowance for the fiscal years ended September 30, 2013 and 2012 was an increase of $1,968,988 and $2,247,615, respectively. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. The Company considers projected future taxable income and planning strategies in making this assessment. Based on the level of historical operating results and projections for future taxable income, the Company has determined that it is more likely than not that the deferred tax assets will not be realized. Accordingly, the Company has recorded a valuation allowance to reduce deferred tax assets to zero. There can be no assurance that the Company will ever be able to realize the benefit of some or all of the federal and state loss carryforwards or the credit carryforwards, either due to ongoing operating losses or due to ownership changes, which limit the usefulness of the loss carryforwards.

As of September 30, 2013, the Company has available net operating loss carryforwards of $45,392,347 for federal income tax purposes, which will start to expire in 2018. The net operating loss carryforwards for state purposes are $35,164,486 and will begin to expire in 2013. Included in these amounts are federal and state net operating losses of $17,654,877 attributable to stock option deductions of which the tax benefit will be credited to equity when realized. As of September 30, 2013, the Company has available federal research and development credit carryforwards of $29,306 and alternative minimum tax credit carryforwards of $66,320. The research and development credits will start to expire in 2023. As of September 30, 2013, the Company has available state research and development credit carryforwards and manufacturers’ investment credit carryforwards of $21,963 and $8,346, respectively. The state research and development credits have no expiration date and the state manufacturers’ investment credits started to expire in the current year.

The Company’s ability to use its net operating loss and research and development credit carryforwards may be substantially limited due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (“Section 382”), as well as similar state provisions. The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company became a “loss corporation” as defined in Section 382. Due to the existence of the valuation allowance, it is not expected that any possible limitation will have an impact on the results of operations or financial position of the Company.

The difference between the income tax provision (benefit) and income taxes computed using the U.S. federal income tax rate was as follows for the years ended September 30, 2013, 2012 and 2011:


	2013			2012			2011
Amount computed using statutory rate	$	(2,473,374	)	$	(2,666,961	)	$	(42,519	)
Net change in valuation allowance for net deferred tax assets		1,968,987			2,247,615			(18,388	)
Non-deductible items		548,839			807,533			798
Other		—			—			(18,378	)
State income tax		(43,376	)		(392,195	)		80,979

Income tax provision (benefit)	$	1,076		$	(4,008	)	$	2,492

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Because the Company is carrying forward federal and state net operating losses from 1997 and 2002, respectively, the Company is subject to U.S. federal and state income tax examinations by tax authorities for all years since 1997 and 2002, as the case may be. The Company does not have any uncertain tax positions. As of September 30, 2013, no accrued interest or penalties are recorded in the financial statements.