7. INCOME TAXES
The components of the benefit from income taxes in the accompanying consolidated statements of operations are as follows:
| Year Ended September 30, | ||||||||
| 2017 | 2016 | |||||||
| Currently payable: | ||||||||
| Federal | $ | 0 | $ | (3,000 | ) | |||
| State | 0 | 0 | ||||||
| Deferred (credit) | 0 | 0 | ||||||
| $ | 0 | $ | (3,000 | ) | ||||
The provision for income taxes differs from the amount that would result from applying the federal statutory rate for the periods ended September 30, 2017 and 2016 as follows:
| Year ended September 30, | ||||||||||||||||
| 2017 | 2016 | |||||||||||||||
| Amount | % | Amount | % | |||||||||||||
| Statutory tax rate | $ | (89,833 | ) | (34.0 | %) | $ | (12,102 | ) | (34.0 | %) | ||||||
| Research and development tax credits | (13,883 | ) | (5.2 | %) | (15,347 | ) | (43.1 | %) | ||||||||
| Prior years federal refund | 0 | 0.0 | % | (3,000 | ) | (8.4 | %) | |||||||||
| Valuation allowance change | 103,647 | 39.2 | % | 27,412 | 77.0 | % | ||||||||||
| Permanent differences | 69 | 0.0 | % | 37 | 0.1 | % | ||||||||||
| $ | 0 | 0.0 | % | $ | (3,000 | ) | (8.4 | %) | ||||||||
The temporary differences which give rise to deferred tax assets and (liabilities) at September 30 are as follows:
| 2017 | 2016 | |||||||
| Inventory | $ | 157,515 | $ | 154,364 | ||||
| Accrued warranty | 4,250 | 4,250 | ||||||
| Accrued vacation | 26,347 | 42,820 | ||||||
| Accounts receivable | 1,432 | 1,432 | ||||||
| Valuation allowance | (189,544 | ) | (202,866 | ) | ||||
| Net deferred tax assets | ||||||||
| (liabilities) - current | $ | 0 | $ | 0 | ||||
| Accelerated depreciation | $ | 27,320 | $ | 17,111 | ||||
| Research and development | ||||||||
| tax credit carry forward | 288,369 | 274,486 | ||||||
| AMT credit carry forward | 37,521 | 37,521 | ||||||
| NOL carry forward | 268,666 | 175,789 | ||||||
| Valuation allowance | (621,876 | ) | (504,907 | ) | ||||
| Net deferred tax assets | ||||||||
| (liabilities) – noncurrent | $ | 0 | $ | 0 | ||||
| Net deferred tax assets | $ | 0 | $ | 0 | ||||
As required by FASB ASC 740 the Company has evaluated the positive and negative evidence bearing upon the realization of its deferred tax assets. The Company has determined that, at this time, it is more likely than not that the Company will not realize all of the benefits of federal and state deferred tax assets, and, as a result, a valuation allowance was established. The research and development tax credit carry forwards and NOL carry forwards of approximately $288,000 and $830,000 expire in 2036. At September 30, 2017, the Company’s federal AMT credit can be carried forward indefinitely. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the fiscal years September 30, 2015 through September 30, 2017. The Company has no uncertain tax positions. As of September 30, 2017 and 2016 there is no accrual for interest or penalties related to uncertain tax positions.