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 exercise significant judgment in evaluating 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 June 30, 2015, we have no available taxable income in prior carryback years, sufficient reversals of future taxable temporary differences 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 June 30, 2015, we were no longer in a three year cumulative loss position for financial reporting purposes in our significant jurisdictions, we believe there remains 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 uncertainty exists due to many factors including the impact of overall economic conditions along with the cyclical nature of our operations. Additionally, historically it has been difficult to project our industry’s trends and therefore our expected financial performance (earnings). Based on our analysis as of June 30, 2015 and the weight of all the available evidence, we have determined that our deferred tax assets need a full valuation allowance. However, with continued positive improvements in overall economic conditions and the ability to maintain additional future profitability, along with improved confidence levels for achieving the forecasted profitability, and consideration of all other appropriate positive and negative evidence, we currently believe that substantially all of the deferred tax asset valuation allowance may be reversed as early as the end of our current fiscal year September 30, 2015, depending on the aforementioned factors and circumstances. We will continue to evaluate the need for a valuation allowance. If the full valuation allowance is reversed, we will recognize the deferred tax asset realizability and report a full income tax provision.