NOTE 8. Income Taxes

Income taxes for the nine month period ended December 31, 2014 was computed on the pre-tax income using the effective tax rate estimated to be applicable for the full fiscal year, which is subject to ongoing review and evaluation by management.

At December 31, 2014, the Company has available an Alternative Minimum Tax Credit of approximately $517 and is available to reduce future federal taxes. A valuation allowance of $1,051 exists relating to other items, as it is management’s belief that it is more likely than not that a portion of this deferred asset is not realizable. An increase in the valuation allowance of $786, is a result of state tax carryforwards that have been determined to be not more likely than not realizable.

The Company completed its qualitative and quantitative analysis of the available federal and state research and experimental tax credit in the quarter ended December 31, 2014 in order to determine the amount of previously unclaimed credits. The Company recorded a net benefit associated with recognition of the federal and state research and experimental tax credit of $5,020, as reflected in the current fiscal year income tax benefit. With the recognition of the benefit, the Company also recorded a liability relating to uncertain tax positions of $212. At December 31, 2014, the Company does not expect the liability for uncertain tax positions to change in the next twelve months. The entire amount would be a benefit to the tax expense in the period in which the liability is reduced.