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17. Income Taxes

12 Months Ended

Sep. 30, 2017

Income Tax Disclosure [Abstract]

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.

Income tax expense for the years ended September 30, 2017 and 2016 is as follows:

		2017				2016 (Restated)
Current expense:
Federal		$	313,405			$	103,704
State			243,841				52,745
			557,246				156,449
Deferred expense:
Federal			3,397,732				(15,114,529	)
State			126,841				(609,764	)
			3,524,573				(15,724,293	)
Total income tax expense		$	4,081,819			$	(15,567,844	)

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

		2017								2016 (Restated)
		Amount				Percent				Amount				Percent

Federal statutory rates		$	3,598,424				34%			$	1,830,150				77%
State income taxes			299,216				3%				161,484				7%
Permanent differences			71,908				1%				(1,798,450	)			-75%
Net operating loss adjustment			–								(1,194,004	)			-50%
Property & equipment adjustment			–								742,854				31%
Equity compensation adjustment			–								(2,872,210	)			-120%
Valuation allowance against net deferred tax assets			–								(12,284,278	)			-515%
Other			112,271				1%				(153,390	)			-6%
Effective rate		$	4,081,819				39%			$	(15,567,844	)			-652%

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


		2017				2016 (Restated)
Deferred income tax asset, current:
Allowance for bad debts		$	401,866			$	406,733
Accrued expenses			31,183				241,536
Inventory			772,657				414,575
Accrued compensation			–				–
Total deferred income tax asset, current			1,205,706				1,062,844
Less: valuation allowance			–				–
Deferred income tax asset, current, net			1,205,706				1,062,844

Deferred income tax asset (liability), long-term:
Net operating loss			7,804,948				9,915,371
Tax credits			377,776				–
Other			3,743				–
Stock compensation			2,982,009				–
Intangibles			13,126				794,455
Property & equipment			(3,387,298	)			751,912
Total deferred income tax asset, long-term			7,794,304				11,461,738

Less: valuation allowance			–				–
Deferred income tax asset, net			7,794,304				11,461,738

Total deferred income tax asset		$	9,000,010			$	12,524,582

We reduced our valuation allowance by $12,284,278 (as restated) based on the profitable operations of our acquired Marquis subsidiary that can be offset against our net operation loss carryforwards, this release in valuation allowance occurred during the period ending September 30, 2016.

The Company annually conducts an analysis of its tax positions and has concluded that it has no uncertain tax positions as of September 30, 2017. The Company’s policy is to record uncertain tax positions as a component of income tax expense.

The Company has net operating loss carry-forwards of approximately $22.7 million as of September 30, 2017 and tax credit carry-forwards of $0.4 million respectively. The net operating loss amounts are subject to IRS code section 382 limitations and expire in 2027. The 2014 through 2016 tax years are open to examination by the various federal and state jurisdictions.

The Company restated the prior year deferred income taxes related to the Marquis acquisition. Certain deferred tax items were not recorded by the Company. The Company has adjusted the deferred taxes associated with property and equipment and stock compensation.

		September 30, 2016
		As previously
		Reported				Adjustment				As restated

Income tax expense (benefit):
Federal statuary rate		$	1,830,150			$	–			$	1,830,150
State taxes, net of federal benefit			161,484				–				161,484
Permanent difference			(852,646	)			(945,804	)			(1,798,450	)
Net operating loss adjustment			(1,083,866	)			(110,138	)			(1,194,004	)
Property and equipment adjustment			–				742,854				742,854
Equity compensation adjustment			–				(2,872,210	)			(2,872,210	)
Valuation allowance			(12,284,278	)			–				(12,284,278	)
Other			(264,065	)			110,675				(153,390	)
		$	(12,493,221	)		$	(3,074,623	)		$	(15,567,844	)