Annual report pursuant to Section 13 and 15(d)

INCOME TAXES

INCOME TAXES

12 Months Ended

Sep. 30, 2015

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

10.

INCOME TAXES

The Company files a consolidated U.S. federal income tax return and various state tax returns.

The following summarizes the income tax provision (benefit):

	For The Years Ended
	September 30,
	2015		2014
Current:
Federal	$	-	$	883,393
State and local		-		77,946
Utilization of fully reserved net operating losses		-		(961,339)
		-		-
Deferred:
Federal		(1,186,733)		560,270
State and local		98,834		49,436
		(1,087,899)		609,706
Change in valuation allowance		1,087,899		(609,706)
Income tax provision (benefit)	$	-	$	-

The Company has the following net deferred tax assets:

	September 30,
	2015		2014

Net operating loss carryforwards	$	1,445,277	$	791,255
Accruals		2,007,371		1,353,310
Other - reserves		301,631		329,596
Deferred tax assets, gross		3,754,279		2,474,161
Property and equipment		(192,219)		-
Sub-total		3,562,060		2,474,161
Valuation allowance		(3,562,060)		(2,474,161)

Deferred tax assets, net	$	-	$	-

The reconciliation of the expected tax expense (benefit), based on statutory rates, with the actual expense, is as follows:

	For The Years Ended
	September 30,
	2015			2014

Expected federal statutory rate		(34.0)	%		34.0	%
State tax rate, net of federal benefit		(1.0)	%		3.1	%
Permanent differences - meals & entertainment		0.6	%		0.8	%
Impact of change in weighted average state tax rate		3.8	%		0.0	%
Change in valuation allowance		30.6	%		(37.9)	%

Income tax provision (benefit)		0.0	%		0.0	%

For the years ended September 30, 2015 and 2014, the Company had approximately $4,129,000 and $2,139,000 of federal and state net operating loss carryovers (“NOLs”), respectively, which begin to expire in 2032. However, the Company has not filed its federal and state income tax returns for its fiscal years ended September 2012, 2013, 2014 or 2015. Therefore, the Company’s NOLs will not be available to offset future taxable income, if any, until the returns are filed. These NOLs are subject to annual limitations under Internal Revenue Code Section 382 if there is a greater than 50% ownership change. In addition, Beacon had generated approximately $25 million of NOLs prior to the Beacon Merger, which the Company’s preliminary analysis indicates would be subject to significant limitations pursuant to Internal Revenue Code Section 382, such that no deferred tax asset has been reflected herein related to the Beacon NOLs.

The Company, after considering all available evidence, fully reserved its deferred tax assets since it is more likely than not that such benefits will not be realized in future periods. Although the Company generated modest book and tax income during the year ended September 30, 2014, prior to that and in the current fiscal year the Company incurred regular book and tax losses. The Company will continue to evaluate its deferred tax assets to determine whether any changes in circumstances could affect the realization of their future benefit. If it is determined in future periods that portions of the Company’s deferred tax assets satisfy the realization standards, the valuation allowance will be reduced accordingly. During the years ended September 30, 2015 and 2014, the valuation allowance increased by $1,087,899 and decreased by $609,706, respectively.

The Company does not have any uncertain tax positions for which it is reasonably possible that the total amount of gross unrecognized tax benefits will increase or decrease within 12 months of September 30, 2015. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.