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. As of September 30, 2015 and December 31, 2015, we had a valuation allowance on our deferred tax assets of $1.7 million.

During the three months ended December 31, 2015 we recognized an income tax provision of $547,000. The effective income tax rate for the three months ended December 31, 2015 was 38.1%. We had no income tax expense for the three months ended December 31, 2014 due to the full valuation allowance on deferred tax assets. The majority of the valuation allowance was released in the fourth quarter of fiscal 2015.