Note 4. Income taxes

3 Months Ended

Mar. 31, 2016

Income Tax Disclosure [Abstract]

Income taxes

 We recognized income tax expense of ($197,922) for the three-month period ended March 1, 2016 and income tax benefit of $163,421 during the three-month period ended March 31, 2015, based on our projections of future profitability. At the end of each interim period, we estimate the effective tax rate we expect to be applicable for the full fiscal year and this rate is applied to our results for the year-to-date period, and then adjusted for any discrete period items.  The variation between the Company’s estimated annual effective tax rate and the US Statutory rate of 34% is due primarily to partial release of the valuation allowance, foreign rate differentials, state income taxes and non-cash interest.

During the three-month periods ended March 31, 2016 and 2015, the Company released $78,400 and $210,370 of its valuation allowance related to federal and state net operating losses, which resulted in a net benefit of $40,875 and $210,370, respectively.  The tax benefits from US net operating losses that were previously reserved were acquired as part of the acquisition of  PrecisionIR (PIR).  At the date of acquisition, management believed it was more likely than not that the benefits would not be used due to the uncertainty of future profitability and also due to statutory limitations on the amount of net operating losses that can be carried forward in an acquisition.  Each quarter, the Company performs a detailed analysis to determine its ability to utilize the tax benefits and determined that portions of the tax benefits could be used.  Therefore, as of March 31, 2016, the Company has released portions of the reserve related to tax years through 2016 based on current best estimates of profitability.