INCOME TAXES

Income taxes consist of the following:



	Fiscal Year
	2015			2014
Current tax (expense) benefit:
Federal	$	—		$	131,816
State	(17,578		)	34,611
	(17,578		)	166,427
Deferred tax benefit:
Federal	8,838			663,681
State	737			56,901
	9,575			720,582
Current and deferred tax (expense) benefit	$	(8,003	)	$	887,009

The income tax (expense) benefit for income taxes differs from the amount computed using the federal statutory income tax rate as follows:



	Fiscal Year
	2015			2014
Federal tax benefit at statutory rate	$	1,455,816		$	4,385,479
State and local taxes, net of federal benefit (expense)	(267,997		)	325,966
Change in valuation allowance	(1,629,786		)	(4,030,864		)
Permanent items:
Incentive stock options	(513,708		)	(421,366		)
Transaction costs	—			(5,291		)
Escrow refund	255,000			—
Change in fair value of warrants liability	553,951			776,337
Other	(28,914		)	(44,719		)
Reserve for uncertain tax position	—			164,127
Other	167,635			(262,660		)
Income tax (expense) benefit	$	(8,003	)	$	887,009

The Company provides deferred income taxes for temporary differences between assets and liabilities recognized for financial reporting and income tax purposes. The income tax effects of these temporary differences and credits are as follows:



	January 31,
	2016			2015
Deferred tax assets:
Allowance for doubtful accounts	$	58,379		$	245,252
Deferred revenue	244,163			372,275
Accruals	203,291			174,658
Net operating loss carryforwards	15,179,685			14,905,174
Stock compensation expense	592,654			438,659
Property and equipment	78,295			—
AMT credit	102,144			102,144
Other	17,794			8,912
Total deferred tax assets	16,476,405			16,247,074
Valuation allowance	(14,184,030		)	(12,554,242		)
Net deferred tax assets	2,292,375			3,692,832
Deferred tax liabilities:
Property and Equipment	—			(21,755		)
Definite-lived intangible assets	(2,292,375		)	(3,671,077		)
Indefinite-lived intangibles	—			(9,575		)
Total deferred tax liabilities	(2,292,375		)	(3,702,407		)
Net deferred tax liabilities	$	—		$	(9,575	)

At January 31, 2016, the Company had U.S. federal net operating loss carry forwards of $44,347,000, which expire at various dates through fiscal 2035. The Company also has an Alternative Minimum Tax net operating loss carry forward of $39,656,000, which has an unlimited carry forward period. The Company also had state net operating loss carry forwards of $16,144,000, which expire on or before fiscal 2035.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. The Company established a valuation allowance of $14,184,000 and $12,554,000 at January 31, 2016 and 2015, respectively. The increase in the valuation allowance of $1,630,000 was driven primarily by losses incurred during the year ended January 31, 2016. Management believes it is more likely than not the Company will realize the remaining deferred tax assets, net of existing valuation allowances, in future years.

Due to the reporting requirements of ASC 718, $1,592,000 of the net operating loss carryforward (tax effected $588,000) is not recorded on the Company’s balance sheet because the loss was created by the tax benefits of stock option exercises, which cannot be recognized for book purposes until the benefit has been realized by actually reducing taxes payable. When recognized, the tax benefit of these losses will be accounted for as a credit to additional paid in capital rather than a reduction of the income tax provision.

The Company and its subsidiary are subject to U.S. federal income tax as well as income taxes in multiple state and local jurisdictions. The Company has concluded all U.S. federal tax matters for years through January 31, 2011. All material state and local income tax matters have been concluded for years through January 31, 2010.

The Company did not have a reserve for uncertain tax positions as of both January 31, 2016 and 2015. As of both January 31, 2016 and 2015, the Company had no accrued interest and penalties associated with unrecognized tax benefits.

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest and penalties) is as follows:



	2015		2014
Beginning of fiscal year	$	—	$	121,000
Additions for tax positions of prior years	—		—
Reductions for tax positions of prior years	—		—
Reductions attributable to lapse of statute of limitations	—		(121,000		)
End of fiscal year	$	—	$	—