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Craig A. Smith & Associate, Inc. and NIPS31), LLC Notes to Financial Statements NOTE 1 — NATURE OF THE COMPANIES & SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Taxes In 2009, Craig A. Smith & Associates, Inc. and its shareholders, elected to have its income taxed under section 1382 of the Internal Revenue Code and conduct business as an S -Corporation. As a result, the individual shareholders are taxed on the income of Craig A. Smith & Associates, Inc. and the Corporation itself is not subject to corporate income taxes. Tax years for 2012, 2013 and 2014 are still subject to audit, however, there has been no notice given that the Internal Revenue Service is going to perform any audits. MPS3D, LLC is a separate entity for tax purposes and is taxed as a Partnership with the income or loss and other credits or deductions passed through to its individual partners. Management's Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Risk Historically, the Companies have maintained a wide mix of customers and therefore have limited or no risk of concentration, however as of December 31, 2015 and 2014 four customers and one customer accounted for 45% and 20% of total accounts receivable, respectively. The Companies collected the outstanding balances in the months following the year end. The Companies' suppliers consist of various consultants so there is limited or no risk of concentration. Fair Value of Financial Instruments The carrying amounts reported in the balance sheet for accounts receivable, accounts payable, accrued liabilities and loans receivable approximate fair value based on the short-term and long term maturity of these instruments. Accounting for Long -Lived Assets The Companies review long-lived assets and certain identifiable assets for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recoverable. To the extent the carrying values exceed fair values, an impairment loss is recognized in operating results. No impairment loss was recognized for either 2015 or 2014 by the Companies. -8- 58