| Income Taxes | (7) Income Taxes The Company accounts for income taxes under
the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax
consequences of events that have been included in the consolidated financial statements. Under this method, the Company determines
deferred tax assets and liabilities based on the differences between the consolidated financial statements and the tax basis of
assets and liabilities by using estimated tax rates for the year in which the differences are expected to reverse. The Company recognizes deferred tax assets
to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, it considers
all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future
taxable income, tax planning strategies, and results of recent operations. If it determines that the Company would be able to realize
our deferred tax assets in the future in excess of their net recorded amount, it would make an adjustment to the deferred tax asset
valuation allowance, which would reduce the provision for income taxes. In assessing the realizability of its deferred
tax assets, management evaluated whether it is more likely than not that some portion, or all of its deferred tax assets, will
be realized. The realization of its deferred tax assets relates directly to the Company’s ability to generate taxable income.
The valuation allowance is then adjusted accordingly. During the year ended December 31, 2018, the
Company incurred income, which created a decrease in its deferred tax asset with a corresponding income tax expense of $68,955. On December 22, 2017, the Tax Cuts and Jobs
Act of 2017 (“the Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include,
but are not limited to, a reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation
of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the
deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one
time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, immediate deductions for certain
new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and
credits. We have calculated our best estimate of the impact of the Act in our year end income tax provision in accordance with
our understanding of the Act and guidance available as of the date of this filing and as a result have recorded $1,834,571 as additional
income tax provision in the fourth quarter of 2017, the period in which the legislation was enacted. The amount related to the
remeasurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future,
was a provision of $1,834,571. On December 22, 2017, the SEC staff issued
Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax
Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies
to complete the accounting under ASC 740, Income Taxes In connection with our initial analysis of
the impact of the Tax Act, we have recorded a provisional income tax provision of $1,834,571 for the revaluation of our net deferred
tax asset. The income tax benefit (provision) consists
of the following for the years ending December 31, 2018 and 2017:
December 31, 2018 December 31, 2017
Current
Federal $ (52,273 ) $ 159,786
State (9,036 ) 17,060
(61,309 ) 176,846
Deferred
Federal (6,519 ) (4,659 )
State (1,127 ) (498 )
(68,955 ) 171,689
Tax Cuts and Jobs Act of 2017 effect - (1,834,571 )
Valuation allowance
Income tax provision $ (68,955 ) $ (1,662,882 ) As of December 31, 2018, the Company had net
operating loss early forwards of approximately $13,500,000. The federal net operating loss carry forwards will not expire as a
result of the Tax Act legislation, and state net operating loss early forwards that will expire in 2026 through 2037. The components of deferred tax assets and liabilities
as of December 31, 2018, and 2017 is as follows:
December 31, 2018 December 31, 2017
Deferred tax assets:
NOL and contribution carry forwards $ 3,258,113 $ 3,340,868
Meals and entertainment 3,350 870
Share based compensation 519,085 474,588
Total deferred tax assets 3,780,548 3,816,326
Deferred tax liabilities:
Property and equipment (106,369 ) (106,369 )
Goodwill (267,328 ) (234,152 )
Total deferred tax liabilities (373,698 ) (340,521 )
Deferred tax asset - net before valuation allowance 3,406,850 3,475,805
Less valuation allowance - -
Deferred tax asset - net $ 3,406,850 $ 3,475,805 A reconciliation of the federal and state statutory
income tax rates to the Company’s effective income tax rate applicable to income before income tax benefit from continuing
operations is as follows for the years ended December 31, 2018 and 2017:
December 31, 2018 December 31, 2017
Expected provision at US statutory rate 21.00 % (34.00 )%
State income tax net of federal benefit 3.63 % (3.63 )%
Other items effecting timing differences % 1.17 %
Tax cut and jobs act of 2017 effect 0.00 % 400.93 %
Valuation allowance 0.00 % 0.00 %
Effective income tax rate 24.63 % 364.47 % The Company files income tax returns on a consolidated
basis in the United States federal jurisdiction and the State of Florida. As of December 31, 2018, the tax returns for the Company
for the years ending 2014 through 2017 remain open to examination by the Internal Revenue Service and Florida Department of Revenue.
The Company and its subsidiaries are not currently under examination for any period. Should the Company undergo an ownership change
as defined in Section 382 of the Internal Revenue Code, the Company’s tax net operating loss carry forwards generated prior
to the ownership change will be subject to an annual limitation, which could reduce or defer the utilization of these losses. |
