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Income Taxes | 12 Months Ended
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Dec. 31, 2014
Income Taxes [Abstract] |
Income Tax Disclosure [Text Block] |
10. | Income Taxes
The Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. Under ASC 740, deferred tax assets and liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted marginal tax rate. 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. In assessing the ability to realize deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. ASC 740 requires that the net deferred tax asset be reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the net deferred tax asset will not be realized. As of December 31, 2014, the Company had recorded a deferred tax asset of approximately $5.0 million reflecting the benefit of approximately $21.5 million in net operating loss (NOL) carry forwards available to offset future taxable income for federal income tax purposes, net of the potential Section 382 limitations. These federal NOL carry forwards expire between 2017 and 2032. Included in the recorded deferred tax asset, the Company had a benefit of approximately $18.5 million available to offset future taxable income for state income tax purposes. These state NOL carry forwards expire between 2024 and 2032. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of our domestic NOL may be limited in future periods. Further, a portion of the carryforwards may expire before being applied to reduce future income tax liabilities. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. Under existing income tax accounting standards such objective evidence is more heavily weighted in comparison to other subjective evidence such as our projections for future growth, tax planning and other tax strategies. A significant piece of objective negative evidence considered in management’s evaluation of the realizability of its deferred tax assets was the existence of cumulative losses over the latest three-year period. Management forecast future taxable income, but concluded that there may not be enough of a recovery before the end of the fiscal year to overcome the negative objective evidence of three years of cumulative losses. On the basis of this evaluation, management recorded a valuation allowance of $5.0 million against all deferred tax assets during the third quarter of fiscal 2014. If management’s assumptions change and we determine we will be able to realize these deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on deferred tax assets will be accounted for as a reduction of income tax expense. The Company files U.S. federal income tax returns with the Internal Revenue Service (“IRS”) as well as income tax returns in various states and certain foreign countries. The Company may be subject to examination by the IRS for tax years 2003 and forward. The Company may be subject to examinations by various state taxing jurisdictions for tax years 2003 and forward. The Company may be subject to examination by various foreign countries for tax years 2014 forward. As of December 31, 2014, the Company is currently not under examination by the IRS, any state or foreign tax jurisdiction. The Company did not have any unrecognized tax benefits at either December 31, 2014 or 2013. In the future, any interest and penalties related to uncertain tax positions will be recognized in income tax expense. Provision for income taxes is as follows for the years ended:
|  | DECEMBER 31, |
|  | 2014 |  | 2013 |  | 2012 |
Current provision (benefit) |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (146,125) |  | $ | - |  | $ | - |
State |  |  | 39,522 |  |  | 249,273 |  |  | (17,864) |
Foreign |  |  | 5,796 |  |  | - |  |  | - |
Total |  |  | (100,807) |  |  | 249,273 |  |  | (17,864) |
Deferred provision (benefit) |  |  |  |  |  |  |  |  |  |
Federal |  |  | 3,459,123 |  |  | 96,180 |  |  | (33,748) |
State |  |  | 234,398 |  |  | 17,311 |  |  | (48,075) |
Foreign |  |  | - |  |  | - |  |  | - |
Total |  |  | 3,693,521 |  |  | 113,491 |  |  | (81,823) |
Income tax provision (benefit) |  | $ | 3,592,714 |  | $ | 362,764 |  | $ | (99,687) |
The provision (benefit) for income taxes results in effective rates, which differs from the federal and state statutory rate as follows for the years ended:
|  | DECEMBER 31, |
|  | 2014 |  |  | 2013 |  |  | 2012 |
Statutory federal income tax rate |  |  | 34.0 | % |  |  | 34.0 | % |  |  | 34.0 | %
State income tax rate (net of federal benefit) |  |  | -3.8 | % |  |  | -8.8 | % |  |  | 3.1 | %
Non-deductible expenses |  |  | -0.6 | % |  |  | -2.4 | % |  |  | 3.1 | %
Change in valuation allowance |  |  | -103.2 | % |  |  | — |  |  |  | -3.9 | %
Adjustments to state net operating losses |  |  | 0.0 | % |  |  | 0.0 | % |  |  | -7.8 | %
Adjustments to share-based compensation |  |  | — |  |  |  | -53.8 | % |  |  | 3.5 | %
Change in fair value of contingent consideration |  |  | 0.0 | % |  |  | 0.0 | % |  |  | -44.5 | %
Return to accrual difference true-ups |  |  | -3.5 | % |  |  | 1.6 | % |  |  | -0.1 | %
Other |  |  | 1.2 | % |  |  | — |  |  |  | — |
Combined effective tax rate |  |  | -75.9 | % |  |  | -29.4 | % |  |  | -12.6 | %
The deferred tax assets (liabilities) consisted of the following:
|  | DECEMBER 31, |
|  | 2014 |  | 2013 |
Deferred tax assets: |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 7,003,976 |  | $ | 4,985,548 |
Alternative minimum tax credit |  |  | 45,650 |  |  | 45,650 |
Share-based compensation |  |  | 340,735 |  |  | 381,123 |
Intangible amortization |  |  | 968,485 |  |  | 714,354 |
Foreign depreciation |  |  | 18,584 |  |  | 46,373 |
Other assets |  |  | 186,900 |  |  | 166,642 |
Total deferred tax assets |  |  | 8,564,330 |  |  | 6,339,690 |
Less: valuation allowance |  |  | (5,996,720) |  |  | (712,847) |
Total deferred tax assets, net |  |  | 2,567,610 |  |  | 5,626,843 |
Deferred tax liabilities: |  |  |  |  |  |  |
Goodwill amortization |  |  | 2,238,814 |  |  | 1,886,197 |
Foreign intangible amortization |  |  | 447,811 |  |  | — |
Depreciation |  |  | 231,192 |  |  | — |
Other liabilities |  |  | 16,195 |  |  | — |
Foreign capitalized software costs |  |  | 62,825 |  |  | 33,759 |
Total deferred tax liabilities |  |  | 2,996,837 |  |  | 1,919,956 |
Net deferred tax (liability) asset |  | $ | (429,227) |  | $ | 3,706,887 |
Changes in the valuation allowance for the years ended were as follows:
|  | DECEMBER 31, |
|  | 2014 |  | 2013 |  | 2012 |
Beginning balance |  | $ | (856,085) |  | $ | (849,654) |  | $ | (880,384) |
Decreases (Increases) |  |  | (5,283,873) |  |  | (6,431) |  |  | 30,730 |
Ending balance |  | $ | (6,139,958) |  | $ | (856,085) |  | $ | (849,654) |

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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