7.	INCOME TAXES:

We account for income taxes in accordance with FASB Accounting Standards Codification 740, “Income Taxes” (“ASC 740”). Under ASC 740, we recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized by considering all available positive and negative evidence.

Pursuant to ASC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets. ASC 740 provides for four possible sources of taxable income to realize deferred tax assets: 1) taxable income in prior carryback years; 2) reversals of existing deferred tax liabilities; 3) tax planning strategies and 4) projected future taxable income. As of December 31, 2014, we have no available taxable income in prior carryback years, reversals of existing deferred tax liabilities or prudent and feasible tax planning strategies. Therefore, the recoverability of our deferred tax assets is dependent upon generating future taxable income. Although as of December 31, 2014, we were no longer in a three year cumulative loss position for financial reporting purposes in our significant jurisdictions, we believe there is sufficient negative evidence concerning our projected future taxable income and, therefore, the realization of our deferred tax assets. Our future taxable income is inherently difficult to project and subject to uncertainty due to many factors including the impact of general economic conditions and the cyclical nature of our operations which historically has resulted in losses in the first half of our fiscal year. Additionally, historically it has been difficult to project our industry’s trends and therefore our results. Based on our analysis of the available evidence we determined that our deferred tax assets needed a full valuation allowance as of December 31, 2014. We will continue to evaluate the need for a valuation allowance. If the full valuation allowance is reversed, we will start recording a tax provision.