Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

Income Taxes

v3.3.1.900
Income Taxes
12 Months Ended
Dec. 31, 2015
Income Tax Disclosure [Abstract]  
Income Taxes

Note H – Income Taxes

Significant components of the provision for income taxes for the years ended December 31, 2015, 2014 and 2013 is as follows (in thousands):

 

 

 

2015

 

 

2014

 

 

2013

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

56

 

 

$

113

 

 

$

93

 

State

 

 

101

 

 

 

44

 

 

 

59

 

Total Current Provision

 

$

157

 

 

$

157

 

 

$

152

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(1,866

)

 

$

 

 

$

 

State

 

 

(245

)

 

 

 

 

 

 

Total Deferred Provision (Benefit)

 

$

(2,111

)

 

$

 

 

 

$

 

 

 

A reconciliation of the differences between the effective tax rate and the federal statutory tax rate for the years ended December 31, 2015, 2014 and 2013 is as follows:

 

 

 

2015

 

 

2014

 

 

2013

 

Federal statutory tax rate

 

 

34.00

%

 

 

34.00

%

 

 

34.00

%

State income taxes, net of federal income tax benefit

 

 

4.41

%

 

 

3.37

%

 

 

1.77

%

Non-deductible expenses

 

 

(29.17

)%

 

 

5.89

%

 

 

1.89

%

Non-deductible stock options and warrants

 

 

(10.24

)%

 

 

4.00

%

 

 

14.45

%

Non-deductible tax expense

 

 

0.00

%

 

 

8.79

%

 

 

%

Prior year adjustments for stock compensation

 

 

(0.26

)%

 

 

(27.93

)%

 

 

%

Other, net

 

 

%

 

 

%

 

 

0.26

%

Valuation allowance

 

 

49.49

%

 

 

(15.96

)%

 

 

(45.44

)%

Effective tax rate

 

 

48.23

%

 

 

12.16

%

 

 

6.93

%

 

The prior year adjustments for stock compensation in the rate reconciliation for 2014 primarily relate to the recognition of deferred tax assets for non-qualified stock options from prior years, although such deferred tax assets would be fully reserved by a valuation allowance.

The valuation allowance is allocated between the current and noncurrent classification depending on the division of deferred tax assets between current and noncurrent classifications.  At December 31, 2015 and 2014, our current and non-current deferred income tax assets and liabilities consisted of the following (in thousands):

 

 

 

2015

 

 

2014

 

Current deferred income tax assets:

 

 

 

 

 

 

 

 

Allowance for doubtful accounts

 

$

15,201

 

 

$

1,548

 

Accrued vacation

 

 

962

 

 

 

334

 

Other accruals

 

 

476

 

 

 

 

Other

 

 

29

 

 

 

38

 

Subtotal

 

 

16,668

 

 

 

1,920

 

Less valuation allowance

 

 

-

 

 

 

(1,099

)

Total net current deferred income tax assets

 

$

16,668

 

 

$

821

 

Non-current deferred income tax assets (liabilities):

 

 

 

 

 

 

 

 

Net operating loss carry-forwards

 

$

502

 

 

$

1,336

 

AMT credit carry-forward

 

 

152

 

 

 

96

 

Nonqualified stock options and warrants

 

 

1,377

 

 

 

560

 

Accumulated depreciation and amortization

 

 

(34,440

)

 

 

(1,672

)

Subtotal

 

 

(32,409

)

 

 

320

 

Less valuation allowance

 

 

 

 

 

(1,141

)

Total net non-current deferred income tax liability

 

 

(32,409

)

 

 

(821

)

Net deferred income tax asset (liability)

 

$

(15,741

)

 

$

 

 

At December 31, 2015, 2014 and 2013, the Company had federal net operating loss carry forwards of approximately $7.0 million, $8.2 million and $3.4 million, respectively and state net operating loss carry forwards of approximately $0.5 million, $2.3 million and $1.2 million, respectively. The net operating loss amount differs from the recorded deferred tax asset due to the Company not recording the windfall benefit on the exercise of options. Assuming our net operating loss carry forwards are not disallowed because of certain “change in control” provisions of the Internal Revenue Code, these net operating loss carry forwards expire in various years beginning in the year ending December 31, 2028.

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.  We previously established a valuation allowance to fully reserve our net deferred income tax assets as such assets did not meet the more likely than not recognition standard established by ASC Topic 740. As of December 31, 2015, due to an increase of deferred tax liabilities resulting from the acquisition of Clarient, management has determined that sufficient positive evidence exists to conclude that it is more likely than not that additional deferred taxes are realizable and therefore reduced the valuation allowance to zero.  Our valuation allowance decreased by approximately $2,240,800, $174,000 and $552,000 during the years ended December 31, 2015, 2014 and 2013, respectively.

We file income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. For federal and state purposes, we have open tax years from the tax years ended December 31, 2008 to December 31, 2015.  We are not currently subject to any ongoing income tax examinations.

We have examined our current and past tax positions taken, and have concluded that it is more likely than not these tax positions will be sustained in the event of an examination and that there would be no material impact to our effective tax rate. As of December 31, 2015, 2014, and 2013, we had no unrecognized tax benefits. In the event interest or penalties will be accrued, our policy is to include these amounts related to unrecognized tax benefits in income tax expense. As of December 31, 2015, we had no accrued interest or penalties related to uncertain tax positions.