Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

v3.5.0.2
INCOME TAXES
12 Months Ended
Sep. 30, 2016
Income Tax Disclosure [Abstract]  
INCOME TAXES
4.
INCOME TAXES
 
The principal components of the Company's net deferred tax assets consisted of the following at September 30:
 
 
 
2016
 
2015
 
Net operating loss carryforwards
 
$
5,424,530
 
$
3,748,426
 
Capitalized expenditures
 
 
1,104,928
 
 
802,769
 
Research and experimentation credit carryforwards
 
 
458,417
 
 
164,252
 
Stock based compensation
 
 
1,463,474
 
 
1,014,654
 
Property and Equipment
 
 
1,578
 
 
1,569
 
Accrued expenses
 
 
171,083
 
 
124,716
 
Gross deferred tax assets
 
 
8,624,010
 
 
5,856,386
 
Deferred tax asset valuation allowance
 
 
(8,624,010)
 
 
(5,856,386)
 
 
 
 
 
 
 
 
 
Net deferred tax assets
 
$
-
 
$
-
 
 
As of September 30, 2016 and 2015, the Company had federal net operating loss carryforwards of approximately $13,675,000 and $9,509,000, respectively, which may be available to offset future taxable income and which would begin to expire in 2026. As of September 30, 2016 and 2015, the Company had federal research and experimentation credit carryforwards of $380,982 and $139,744, respectively, which may be available to offset future income tax liabilities and which would begin to expire in 2029.
 
As of September 30, 2016 and 2015, the Company had state net operating loss carryforwards of approximately $12,814,000 and $8,487,000, respectively, which may be available to offset future taxable income and which would begin to expire in 2017. As of September 30, 2016 and 2015, the Company had state research and experimentation credit carryforwards of $119,000 and $37,000, respectively, which may be able to offset future income tax liabilities and which would begin to expire in 2023.
 
As the Company has not yet achieved profitable operations, management believes the tax benefits as of September 30, 2016 and 2015 did not satisfy the realization criteria set forth in FASB ASC Topic 740, Income Taxes, and therefore has recorded a valuation allowance for the entire deferred tax asset. The valuation allowance increased in 2016 and 2015 by approximately $2,767,000 and $2,130,000, respectively. The Company’s effective income tax rate differed from the federal statutory rate due to state taxes and the Company’s full valuation allowance, the latter of which reduced the Company’s effective federal income tax rate to zero.
 
The Company experienced an ownership change as a result of the Merger described in Note 1, causing a limitation on the annual use of the net operating loss carryforwards, which are subject to a substantial annual limitation due to the ownership change limitations set forth in Internal Revenue Code Section 382 and similar state provisions.
 
As of September 30, 2016, the Company is open to examination in the U.S. federal and certain state jurisdictions for tax years ended September 30, 2016, 2015, 2014, and 2013.