5.	INCOME TAXES

For the fiscal years ended September 30, 2014, 2013 and 2012 the income tax provision (benefit) was as follows:


	2014		2013		2012
Federal—current	$	—	$	—	$	(4,808	)
State—current		2,226		1,076		800

Total	$	2,226	$	1,076	$	(4,008	)

Significant components of the Company’s net deferred tax assets and liabilities as of September 30, 2014 and 2013 are as follows:


	2014			2013
Deferred tax assets (liabilities):
Net operating loss carryforwards	$	11,401,483		$	10,473,905
Capitalized research and development costs		—			134,550
Stock based compensation		1,228,082			408,588
AMT credit carryforwards		66,320			66,320
Other		250,999			186,212
Research credit carryforwards		43,802			43,802

Total deferred assets		12,990,686			11,313,377
Valuation allowance for net deferred tax assets		(12,990,686	)		(11,313,377	)

Total	$	—		$	—

The Company has provided a valuation allowance against deferred tax assets recorded as of September 30, 2014 and 2013 due to uncertainties regarding the realization of such assets.

The net change in the total valuation allowance for the fiscal years ended September 30, 2014 and 2013 was an increase of $1,677,309 and $1,968,988, 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, 2014, the Company has available net operating loss carryforwards of $47,885,589 for federal income tax purposes, which will start to expire in 2018. The net operating loss carryforwards for state purposes are $37,399,784 and will begin to expire in 2014. 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, 2014, 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, 2014, the Company has available California research and development credit carryforwards of $21,963 which do not expire.

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, 2014, 2013 and 2012:


	2014			2013			2012
Amount computed using statutory rate	$	(1,798,479	)	$	(2,473,374	)	$	(2,666,961	)
Net change in valuation allowance for net deferred tax assets		1,677,309			1,968,987			2,247,615
Non-deductible items		411,473			548,839			807,533
State income tax		(288,077	)		(43,376	)		(392,195	)

Income tax provision (benefit)	$	2,226		$	1,076		$	(4,008	)

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, 2014, no accrued interest or penalties are recorded in the financial statements.