Annual report pursuant to Section 13 and 15(d)

15. Provision for Income Taxes

v2.4.1.9
15. Provision for Income Taxes
 12 Months Ended
Sep. 30, 2014
Income Tax Disclosure [Abstract]  
Provision for Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A full valuation allowance is established against all net deferred tax assets as of September 30, 2014 and 2013 based on estimates of recoverability. While the Company has optimistic plans for its business strategy, it determined that such a valuation allowance was necessary given the current and expected near term losses and the uncertainty with respect to its ability to generate sufficient profits from its new business model.

  

Because of the impacts of the valuation allowance, there was no income tax expense or benefit for the years ended September 30, 2014 and 2013.

 

A reconciliation of the differences between the effective and statutory income tax rates for years ended September 30:

 

    2014     2013  
    Amount     Percent     Amount     Percent  
                                 
Federal statutory rates   $ (1,584,870 )     34%   $ (1,953,982 )     34%
State income taxes     (40,088 )     1%     (193,167 )     3%
Permanent differences     200,518       (4% )     15,967       (0% )
Valuation allowance against net deferred tax assets     1,424,439       (31% )     2,131,182       (37% )
Effective rate   $ –       –%   $ –       –%

 

At September 30, deferred income tax assets and liabilities were comprised of:

 

    2014     2013  
Deferred income tax asset, current:                
Book to tax differences in accounts receivable   $ 259,448     $ 382,218  
Book to tax differences in prepaid assets and accrued expenses     (21,450 )     8,425  
Total deferred income tax asset, current     237,998       390,643  
Less: valuation allowance     (237,998 )     (390,643 )
Deferred income tax asset, current, net     –       –  
                 
Deferred income tax asset, long-term:                
Net operation loss carryforwards     8,668,250       12,821,092  
Book to tax differences for stock based compensation     –       6,407  
Book to tax differences in intangible assets     928,222       6,693,536  
Book to tax differences in other     –       326  
Book to tax differences in depreciation     5,710       –   
Total deferred income tax asset, long-term     9,602,182       (2,297,221 )
Less: valuation allowance     (9,602,182 )     (17,224,140 )
Deferred income tax asset, net     –       –  
                 
Total deferred income tax asset   $ –     $ –  

 

The Company has recorded as of September 30, 2014 and 2013 a valuation allowance of $9,602,182 and $17,224,140, respectively, as it believes that it is more likely than not that the deferred tax assets will not be realize in future years. Management has based its assessment on available historical and projected operating results.

 

The Company annually conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of September 30, 2014.

 

The Company has net operating loss carry-forwards of approximately $24.9 million. Such amounts are subject to IRS code section 382 limitations and expire in 2023. The 2009 to 2012 tax years are still subject to audit.