Income tax expense (benefit) was comprised of the following:

 

		Years Ended July 31,
		2015			2014
Current
Federal		$	-		$	-
State			-			-
Total current			-			-
Deferred
Federal			(1,181,162)			(148,161)
State			(205,397)			(20,260)
Total deferred			(1,386,559)			(168,421)
Change in valuation allowance			1,386,559			168,421
		$	-		$	-

 

The following is a reconciliation of the differences between the actual provision for income taxes and the provision computed by applying the federal statutory rate on income before income taxes for the years ended July 31:

 

		2015			2014
Tax (benefit) at federal statutory rate		$	(1,413,664)		$	(159,070)
State tax (benefit), net of federal benefit			(197,769)			(23,445)
Change in FV of derivative liability			132,880			-
Incentive Stock Options			145,935			15,686
Other			(53,941)			(1,592)
Change in valuation allowance			1,386,559			168,421
Total provision for income taxes		$	-		$	-

 

The significant components of the deferred income tax assets and liabilities as of July 31, 2015 and July 31, 2014 are as follows:

 

		Years Ended July 31,
		2015			2014
Current Deferred Tax Assets:
Accruals		$	117,214		$	17,938
Non-Current Deferred Tax Assets:
Net Operating Loss Carryforwards			1,860,375			754,782
Research and development credits			188,949			145,162
Other Credits			3,635			3,635
Intangible Assets			200,725			28,181
Fixed Assets			(32,166)			2475
Total Non-Current Deferred Tax Assets			2,221,518			934,235
Total Deferred Tax Assets			2,338,732			952,173
Valuation Allowance			(2,338,732)			(952,173)
Net Deferred Tax Assets		$	—		$	—

Future tax benefits, which may arise as a result of these losses, have not been recognized in these financial statements, and have been offset by a valuation allowance since there is no assurance that we will be able to utilize these NOLs.

 

The valuation allowance increased by $1,386,559 from July 31, 2014 to July 31, 2015 primarily due to the generation of current year net operating losses and research and development credits claimed.

 

As of July 31, 2015, the Company had $4,833,000 of federal and $2,992,000 of state net operating loss, respectively, available to offset future taxable income. The federal net operating loss carryforwards begins to expire in 2018 and the state net operating loss carryforwards will begin to expire in 2029, if not utilized. As of July 31, 2015, the Company also had $115,889 of federal and $72,892 of state research and development credit carryforwards, respectively. The federal research and development credit carryforward begins to expire in 2027 and the state research and development credit begins to expire in 2027, if not utilized.