The reconciliation of income tax computed at the Federal statutory rate to the provision for income taxes from continuing operations is as follows:
|
|
|
Year Ended September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Federal taxes (credits) at statutory rates
|
|
$
|
439,000
|
|
|
$
|
398,000
|
|
|
Permanent differences
|
|
|
14,000
|
|
|
|
23,000
|
|
|
State and local taxes, net of Federal benefit
|
|
|
65,630
|
|
|
|
65,340
|
|
|
Reversal/change in valuation allowance
|
|
|
-
|
|
|
|
(2,595,000
|
)
|
|
|
|
$
|
518,630
|
|
|
$
|
(2,108,660
|
)
|
The provisions of income taxes are summarized as follows:
|
|
|
Year Ended September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Current
|
|
$
|
99,482
|
|
|
$
|
92,280
|
|
|
Deferred
|
|
|
419,148
|
|
|
|
(2,200,940
|
) |
|
Total
|
|
$
|
518,630
|
|
|
$
|
(2,108,660
|
)
|
|
|
|
September 30,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Deferred tax assets - net operating loss carryforwards
|
|
$
|
1,781,792
|
|
|
$
|
2,200,940
|
|
|
Total deferred tax assets
|
|
|
1,781,792
|
|
|
|
2,200,940
|
|
|
Valuation allowance
|
|
|
-
|
|
|
|
-
|
|
|
Total deferred tax assets net of valuation allowance
|
|
|
1,781,792
|
|
|
|
2,200,940
|
|
|
Deferred tax liabilities - depreciation and amortization
|
|
|
-
|
|
|
|
1,355,963
|
|
|
Total deferred tax liabilities
|
|
|
-
|
|
|
|
1,355,963
|
|
|
Net deferred tax assets
|
|
$
|
1,781,792
|
|
|
$
|
844,977
|
|
During the year ended September 30, 2015, the Company recorded a 100% valuation allowance against its deferred tax assets which resulted primarily from net operating loss carryforwards. As of September 30, 2016, the Company assessed the likelihood that the deferred tax assets would be recovered from future taxable income would be more likely than not based on all available evidence, both positive and negative. As a result, the Company reversed the valuation allowance, and recorded a deferred tax asset.
The Company has net operating loss carryforwards for income tax purposes that expire as follows:
|
2033
|
|
$
|
4,940,000
|
|
|
2034
|
|
|
753,000
|
|
|
|
|
$
|
5,693,000
|
|
Adjustment to deferred tax liability
During the fiscal year ended September 30, 2017, the Company realized that in the consolidated financial statements for the fiscal year ended September 30, 2016 filed with the SEC, the Company incorrectly included approximately $1.4 million of deferred tax liabilities on Indco's books in the purchase price allocation. The result is that both goodwill and the deferred tax liability should have been approximately $1.4 million lower. The Company debited the deferred tax liability and credited goodwill for approximately $1.4 million to correct the error during the year ended September 30, 2017. Since the deferred tax liability is netted against the deferred tax asset on the consolidated statement of financial condition, the approximately $1.4 million adjustment represents an equal adjustment to two line items (goodwill and deferred income taxes) solely on the asset side of the balance sheet. Therefore, the adjustment had no effect on total assets, no effect on total stockholders' equity and no effect on its operating results. In accordance with the SEC's Staff Accounting Bulletin No. 99 ("SAB 99"), the Company evaluated this error and, based on an analysis of quantitative and qualitative factors, determined that the error was immaterial to the prior reporting periods affected. Therefore, as permitted by SAB 99, the Company corrected, in the current filing, the consolidated statement of financial condition as of September 30, 2017.