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Income Taxes
 6 Months Ended
Jun. 30, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

NOTE 10 — Income Taxes

 

The Company has recorded a provision for income taxes of $32,585 and $7,985 for the three months ended June 30, 2016 and 2015, respectively, and $40,570 and $15,970 for the six-month periods ended June 30, 2016 and 2015, respectively. The provisions for income tax for 2016 include federal alternative minimum tax expense of $18,501, state alternative minimum tax expense of $6,100, and deferred tax expense of $15,969. The deferred tax expense and the deferred income tax amounts shown on the Company’s Balance Sheets are related to the deferred tax liability on the portion of the Company’s goodwill amortized for tax purposes. Due to the indefinite characteristic of this deferred tax liability, it cannot be offset against deferred tax assets.

 

At December 31, 2015, the Company has an unrecognized tax benefit of approximately $754,000, which did not change significantly during the six months ended June 30, 2016. Future changes in the unrecognized tax benefit are unlikely to have an impact on the effective tax rate due to the full valuation allowance recorded on the Company’s deferred tax assets, as realization of the deferred tax assets is dependent upon future taxable income.

 

The Company has maintained a full valuation allowance for all deferred tax assets due to negative evidence outweighing the positive evidence.  The primary negative evidence includes the Company’s history of losses, the phase out of the SoMo® product line with diminishing revenue for 2016, and no contractual commitment assuring future net income.  However, the Company’s short term trend of net income for the last two years allows for the possible reversal of existing taxable temporary differences.  If the Company continues to remain profitable and determines that the positive evidence outweighs the negative evidence, projected future taxable income could be included in the evaluation.