Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.3.1.900
Income Taxes
12 Months Ended
Sep. 30, 2015
Notes to Financial Statements  
11. Income Taxes

The components of the provision for income taxes are as follows:

 

    Year Ended September 30,      
(In Thousands)   2015     2014  
             
Current tax provision   $ -     $ 24  
Deferred tax provision     -       -  
                 
Provision for income taxes   $ -     $ 24  

 

The differences between income taxes calculated at the statutory U.S. federal income tax rate and the Company's provision for income taxes are as follows:

 

    Year Ended September 30,  
(In Thousands)   2015   2014  
           
Income tax provision at statutory federal tax rate   $ -     $ 32  
Valuation allowance   (- )     (8 )
                   
Provision for income taxes   $ -     $ 24    

 

The net deferred income tax asset balance related to the following:

 

    Year Ended September 30,  
(In Thousands)   2015     2014  
                 
Current tax provision   $ -     $ -  
Deferred tax provision (credit) related to:                
Temporary differences                
Stock option expense     234       461  
Deferred compensation expense     -       24  
Vacation expense     (25 )     64  
Intangible assets     126       107  
Non-deductible goodwill and identifiable intangible assets     (633 )        
Allowance for doubtful accounts     101       208  
Other     -       5  
Loss carryforwards     5,849       4,956  
Valuation allowances     (5,652 )     (5,825 )
                 
Provision for income taxes   $ -     $ -  

 

As of September 30, 2015, there were approximately $14,327,000 of losses available to reduce federal taxable income in future years through 2034, and there were approximately $12,977,000 of losses available to reduce state taxable income in future years, expiring from 2015 through 2034.  Due to common stock transactions in the prior years, it is likely that the Company will be limited by Section 382 of the Internal Revenue Code as to the amount of net operating losses that may be used in future years.  The Company is currently evaluating the effects of any such limitation.

 

Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period.  As of September 30, 2015 and 2014, the Company performed an evaluation to determine whether a valuation allowance was needed.  The Company considered all available evidence, both positive and negative, which included the results of operations for the current and preceding years.  The Company also considered whether there was any currently available information about future years.  Because long-term contracts are not a significant part of the Company's business, future results cannot be reliably predicted by considering past trends or by extrapolating past results.  Moreover, the Company's earnings are strongly influenced by national economic conditions and have been volatile in the past.  Considering these factors, the Company determined that it was not possible to reasonably quantify future taxable income.  The Company determined that it is more likely than not that all of the deferred tax assets will not be realized.  Accordingly, the Company maintained a full valuation allowance as of September 30, 2015 and 2014.

 

As a result of continuing losses, we have determined that it is more likely than not that we will not realize the benefits of the deferred tax assets and therefore we have recorded a valuation allowance to reduce the carrying value of the deferred tax assets to zero.  The valuation allowance decreased by $173,000 and increased $1,065,000 in 2015 and 2014, respectively.

 

We file federal and state income tax returns in jurisdictions with varying statutes of limitations. Due to our net operating loss carryforwards, our income tax returns generally remain subject to examination by federal and most state tax authorities. We are not currently under examination in any federal or state jurisdiction.