Annual report pursuant to Section 13 and 15(d)

Income Taxes

v2.4.1.9
Income Taxes
12 Months Ended
Dec. 31, 2014
Income Taxes
12. Income Taxes:

As of December 31, 2014, the Company reported net operating loss carry forwards for federal and state income tax purposes of $27,019,000 and $35,147,000, respectively, which expire between 2019 and 2034. As of December 31, 2013, the Company reported net operating loss carry forwards for federal and state income tax purposes of $22,505,000 and $34,993,000, respectively, which expire between 2018 and 2033. Utilization of net operating loss carryforwards is dependent on generating future taxable income of the appropriate type and in the appropriate jurisdiction. In addition, as a result of transactions consummated during 2012 and 2013, including the issuance of common and preferred stock by the Company and the acquisition of Seesmart and Relume, substantially all of the Company’s net operating loss carryforwards as of December 31, 2014 are subject to limitations imposed by Section 382 of the Internal Revenue Code. During 2013 the Company performed an evaluation of the Section 382 limitations on the use of net operating loss carryforwards and has adjusted them accordingly. The Company has recognized a full valuation allowance related to its remaining net deferred tax assets, including the remaining net operating loss carryforwards.

In conjunction with the 2014 acquisitions, the Company recorded a net deferred tax liability of $6.6 million in its purchase price allocation (see Note 2). This liability can be used to reduce the overall deferred tax asset of the Company and as a result, the Company recognized a corresponding tax benefit related to the reduction of the existing valuation allowance. This benefit resulted in a credit recorded in earnings of $6.6 million for 2014.

Components of deferred tax assets (liabilities) are as follows:

 

(in thousands)

   December 31,  
     2014      2013  

Accounts receivable

   $ 233       $ 58   

Inventories

     1,847         473   

Accrued expenses

     818         825   

Depreciation

     (5      40   

Intangible assets

     (11,232      (5,320

Stock options

     1,339         1,015   

Deferred revenue

     22         46   

Other

     5         6   

Net operating loss carry forwards

     11,860         9,316   
  

 

 

    

 

 

 

Net deferred tax asset

  4,887      6,459   

Valuation allowance

  (4,887   (6,459
  

 

 

    

 

 

 
$ —      $ —     
  

 

 

    

 

 

 

 

In accordance with FASB ASC 740 “Income Taxes”, valuation allowances are provided against deferred tax assets if, based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company has not recorded a provision for income taxes in 2013 and 2012 as the deferred tax benefits of the net losses were offset by a corresponding increase in the deferred tax valuation allowance. The following is a reconciliation of tax computed at the statutory federal rate to the income tax expense in the statements of operations for the years ended December 31, 2014, 2013 and 2012:

 

     December 31,  

(in thousands)

   2014     2013     2012  
     Amount     %     Amount     %     Amount     %  

Tax benefit at statutory federal rate

   $ (3,988     (34.0   $ (5,719     (34.0   $ (2,916     (34.0

Deferred state tax benefit

     (383     (3.3     (258     (1.5     (618     (7.2

Change in valuation allowance

     4,982        42.5        (10,446     (62.1     2,810        32.8   

Tax benefit of acquisition

     (6,550     (55.8     —          —          —          —     

Goodwill impairment

     —          —          —          —          676        7.9   

Adjustment to net operating loss carryforwards

     (120     (1.0     13,828        82.2        41        0.5   

Non-deductible expenses

     160        1.4        2,595        15.4        7        0.0   

Impact of rate change

     (651     (5.6     —          —          —          —     
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income tax benefit

$ (6,550   (55.8 $ —        —      $ —        —