5. Income Taxes

For the three months ended September 30, 2015, the Company recorded an income tax benefit from continuing operations of $168,000.

For the three months ended September 30, 2015 and 2014, the effective rate of 43.3% and 3.7%, respectively, on continuing operations varied from the U.S. federal statutory rate primarily due to permanent book tax differences, state taxes and a change in the valuation allowance.

The Company, as of June 30, 2015, reversed the valuation allowance against its deferred tax assets based on our consideration of all available positive and negative evidence including achieving cumulative profitable operating performance over the past three years and our positive outlook for taxable income for the future. The results of the first quarter fiscal 2016 do not alter the strong positive evidence. As a result, the Company recorded an income tax benefit for the first fiscal quarter 2016 at the annual projected rate of 43.3 %.

As of September 30, 2015 and June 30, 2015, the Company has no material unrecognized tax benefits or accrued interest and penalties.