18. Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

The below tables present the Company’s current year income tax provision and the temporary differences that result from the differences in recognition criteria of certain income and expense items for financial reporting purposes and income tax purposes.

		For the Year Ended December 31,
		2014				2013
Current:
Federal income tax			–				–
State income tax			–				–
Deferred:
Federal income tax			(171,490	)			–
State income tax			(18,309	)			–
Total provision for income taxes			(189,799	)			–

Temporary differences that give rise to deferred tax assets and liabilities are summarized as follows:

		For the Year Ended December 31,
		2014				2013
Deferred tax assets:
Allowance for uncollectible accounts receivable			53,416				84,243
Inventory valuation reserve			190,590				129,824
Accrued sales returns			543,211				–
Accrued royalties			63,835				56,528
Accrued commissions			17,020				34,161
Accrued paid time off			14,993				9,615
Accrued wages			145,772				60,365
Warranty reserve			14,175				10,097
Fixed assets			6,152				19,481
Unearned revenue			260,980				–
Net operating loss carryforward			16,125,758				9,530,417
Gross deferred tax asset			17,435,902				9,934,731
Less deferred tax asset valuation allowance			(17,420,253	)			(9,934,731	)
Deferred tax asset -net			15,649				–
Deferred tax liabilities:
Intangible assets			(15,649	)			–
Gross deferred tax liability			(15,649	)			–
Net deferred tax asset			–				–

As of December 31, 2014, realization of the Company’s net deferred tax assets of approximately $17,420,000 was not considered more likely than not, and accordingly, a valuation allowance of an equal amount was provided. A schedule of net operating loss carry forwards by entity follows:

ASTV						Infusion
Year of Expiration		Year Generated		U.S. Losses (Limited by IRC Section 382)		Year of Expiration		Year Generated		U.S. Losses
3/31/2030		3/31/2010		474,949		12/31/2027		12/31/2007		4,377,277
3/31/2031		3/31/2011		3,432,653		12/31/2028		12/31/2008		5,283,433
3/31/2032		3/31/2012		229,859		12/31/2029		12/31/2009		126,976
3/31/2033		3/31/2013		229,859		12/31/2030		12/31/2010		3,386,963
3/31/2034		3/31/2014		229,859		12/31/2031		12/31/2011		4,521,359
12/31/2034		12/31/2014		3,783,761		12/31/2032		12/31/2012		4,111,085
						12/31/2033		12/31/2013		2,636,040
						12/31/2034		12/31/2014		10,029,390

		Total:		8,380,940				Total:		34,472,523

Ronco’s net operating losses have been excluded from the above table as Infusion and ASTV are unable to utilize them as Ronco is not a member of either Infusion’s or ASTV’s consolidated group. All of Ronco’s results of operations represent the noncontrolling interest and are therefore shown as an adjustment to the Company’s income tax provision.

If there is an ownership change, as defined under Internal Revenue Code section 382, the use of net operating loss and credit carry-forwards may be subject to limitations. On April 2, 2014, ASTV underwent such an ownership change. Accordingly, ASTV’s historical net operating losses are subject to an annual limitation of approximately $230,000. As a result of this annual limitation, ASTV expects to lose approximately $16,547,000 of historical net operating losses.

If additional ownership changes occur in the future, the use of the net operating losses listed above could be subject to further limitations.

The Company determined that there were no uncertain tax positions, and accordingly no associated interest and penalties were required to be accrued at December 31, 2014 and December 31, 2013, respectively. The Company does not believe that there are any tax positions for which a material change in unrecognized tax benefit or liability is reasonably possible in the next twelve months. The Company believes that there are no uncertain tax positions which, if recognized, would impact the effective tax rate.

The Company has evaluated its open years by major jurisdiction and concluded that the tax years 2012, 2013, 2014 and 2015 remain open to examination by federal and state tax authorities.

Infusion is delinquent in filing its tax returns for the tax years 2013, 2014 and 2015. ASTV is delinquent in filing its tax returns for the nine month period ended December 31, 2014 and for tax year 2015.

Below is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2014 and December 31, 2013.

		2014								2013
Tax provision at U.S. federal statutory rate			(15,447,342	)			34.00%			$	(1,358,659	)			34.00%
State income tax provision net of federal tax			(714,285	)			1.57%				(145,057	)			3.63%
Adjustment for noncontrolling interest			8,228,061				-18.11%				–				0.00%
Goodwill impairment			1,092,793				-2.41%				–				0.00%
Gain on warrant remeasurement			(759,593	)			1.67%				–				0.00%
Gain on sale of intangible asset			54,666				-0.12%				–				0.00%
Stock compensation			133,747				-0.29%				–				0.00%
Meals and entertainment			7,391				-0.02%				9,479				-0.24%
Net Operating Loss 382 Adj.			10,019,081				-22.05%				–				0.00%
Change in valuation allowance			(2,804,318	)			6.17%				1,494,237				-37.39%
Provision for income taxes			(189,799	)			0.42%			$	–				0%