XML 59 R19.htm IDEA: XBRL DOCUMENT

Note 12. Income taxes

12 Months Ended

Dec. 31, 2014

The provision (benefit) for income taxes consisted of the following components for the years ended December 31:

	2014			2013
Current:
Federal	$	631,129		$	590,000
State		97,186			103,000
Foreign		(9,278	)		73,000
Total Current		719,037			766,000
Deferred:
Federal		(776,467	)		(213,000	)
State		(130,535	)		24,000
Foreign		(91,510	)		(21,000	)
Total Deferred		(998,512	)		(210,000	)
Total provision for income taxes	$	(279,475	)	$	556,000

Reconciliation between the statutory rate and the effective tax rate is as follows at December 31:

	2014			2013
Federal statutory tax rate		(34.0)	%		34.0	%
State tax rate		(5.3)	%		4.2	%
Permanent difference - transaction costs		4.9	%		10.1	%
Permanent difference – other		8.0	%		0.9	%
Permanent items – disallowed interest		26.2	%		2.0	%
Provision to return		(4.3)	%		(2.0)	%
Foreign rate differential		(26.6)	%		(2.3)	%
UK rate change		(9.8)	%		0.0	%
		(40.9	)%		46.9	%
Change in valuation allowance		(76.9)	%		0.0	%
Total		(117.8)	%		46.9	%

Components of net deferred income tax assets, including a valuation allowance, are as follows at December 31:

	2014			2013			Change
Assets:
Net operating loss	$	561,358		$	766,000		$	(206,462	)
Deferred revenue		35,347			10,000			25,347
Allowance for doubtful accounts		145,335			140,000			5,335
Stock options		211,824			154,000			57,824
Basis difference in intangible assets		190,295			137,000			53,295
Prepaid D&O Insurance		13,996			-			13,996
Accrued accounting fees		-			16,000			(16,000	)
Rent expense		-			26,000			(26,000	)
Foreign tax credits carryforward		1,180,833			1,181,000			(167	)
Other		759			1,000			(241	)
Total deferred tax asset		2,339,747			2,431,000			(91,253	)
Less: Valuation allowance		(1,763,415	)		(1,946,000	)		182,585
Total net deferred tax asset		576,332			485,000			91,332

Liabilities
Prepaid expenses		(32,176	)		(16,000	)		(16,176	)
Basis difference in fixed assets		(19,222	)		(100,000	)		80,778
Debt discount - convertible note payable		(200,559	)		(761,000	)		560,441
Purchase of intangibles		(950,863	)		(1,233,000	)		282,137
Total deferred tax liability		(1,202,820	)		(2,110,000	)		907,180

Total net deferred tax asset / (liability)	$	(626,488	)	$	(1,625,000	)	$	998,512

The Company has $1,763,415 of total valuation allowance for deferred tax assets as of December 31, 2014. The valuation allowance relates to PIR federal net operating losses, state net operating losses, and foreign tax credit carryforwards. In assessing the recovery of the 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 in the periods in which those temporary differences become deductible. Management considers the scheduled reversals of future deferred tax assets, projected future taxable income, and tax planning strategies in making this assessment. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible. It has been determined that it is more likely than not that the deferred tax assets will not be realized, as it has been deemed unlikely that there will be generation of taxable income for the subsidiaries that carry these losses or that sufficient foreign source income would be generated to use the foreign tax credits.

The Company has not recorded deferred income taxes applicable to undistributed earnings of foreign subsidiaries that are indefinitely reinvested in foreign operations. Generally, such earnings become subject to U.S. tax upon the remittance of dividends and under certain other circumstances. It is not practical to estimate the amount of deferred tax liabilities on such undistributed earnings. Undistributed earnings are insignificant as of December 31, 2014 and 2013. The Company is subject to income taxation by both federal and state taxing authorities. Income tax returns for the years ended December 31, 2014, 2013, 2012, 2011, and 2010 are open to audit by federal and state taxing authorities. The Company has reviewed its tax positions and has determined that it has no significant uncertain positions as of December 31, 2014 or 2013.

- 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+ Details