Annual report pursuant to Section 13 and 15(d)

PROVISION FOR INCOME TAXES

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PROVISION FOR INCOME TAXES
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
PROVISION FOR INCOME TAXES
PROVISION FOR INCOME TAXES

The Company recognizes interest related to underpayment of income taxes in interest expense and recognizes penalties in operating expenses. During the year ended December 31, 2017 and nine-month transition period ended December 31, 2016, the Company recognized no interest or penalties related to income taxes. Accordingly, the Company had no accruals for interest and penalties at December 31, 2017 nor December 31, 2016.

The Company is current on its U.S. and Canadian income tax filings. Tax years that remain open for examination are 2015 through 2017 in the U.S. and 2012 through 2017 in Canada. At December 31, 2017 and December 31, 2016, the Company did not have any operating loss carryforwards nor tax credit carryforwards. The Company invests in available-for-sale securities that are reported on the balance sheet at fair value, with the gains/losses reported net of tax as part of Other Comprehensive Income (OCI). The tax expense allocated to OCI during the year ended December 31, 2017 was $14,961.

The Company has not provided a valuation allowance at December 31, 2017 nor December 31, 2016. The valuation allowance did not change between December 31, 2016 and December 31, 2017. Realization of the deferred tax asset is dependent on generating sufficient taxable income to offset the tax items that will be deductible in the future. Although realization is not assured, Management believes it is more likely than not that all of the deferred tax asset will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

On December 22, 2017, President Trump signed a tax reform bill into law that decreased the US Federal corporate income tax rate to 21%. Because the rate change was enacted in 2017, the deferred portion of our tax provision was impacted. This rate change resulted in a reduction of our net deferred tax assets (and reduction in deferred income tax benefit) of approximately $32,000.

The table below outlines the components of income tax expense (benefit):
 
 
For the Year Ended December 31, 2017
 
For the Nine-Month Transition Period Ended December 31, 2016
Current
 
 
 
 
Federal
 
$
2,482,978

 
$
(31,983
)
State
 
130,683

 
(1,683
)
Foreign
 
86,872

 
21,303

Total Current
 
2,700,533

 
(12,363
)
Deferred
 
 
 
 
Federal
 
(55,563
)
 
(203,652
)
State
 
(2,924
)
 
(10,718
)
Effect of tax rate change
 
31,648

 

Total Deferred
 
(26,839
)
 
(214,370
)
Total Provision for (Benefit from) Income Taxes
 
$
2,673,694

 
$
(226,733
)


The table below reconciles our effective tax rate to the statutory tax rate:
 
 
For the Year Ended December 31, 2017
 
For the Nine-Month Transition Period Ended December 31, 2016
Federal Statutory Tax Rate
 
34.0
 %
 
34.0
 %
State Statutory Tax Rate, Net of Federal Effect
 
3.3
 %
 
3.3
 %
Meals & Entertainment
 
1.0
 %
 
(5.2
)%
Gain/loss on Sale of PPE
 
 %
 
(5.9
)%
Goodwill
 
(2.0
)%
 
22.0
 %
Tax Exempt Interest
 
(10.0
)%
 
20.7
 %
Ending Balance True Up
 
 %
 
28.0
 %
Tax Overpayment
 
 %
 
38.3
 %
Other
 
11.2
 %
 
17.3
 %
Effective Tax Rate
 
37.5
 %
 
152.5
 %


The table below shows the components of deferred taxes:
 
 
As of
 
 
December 31, 2017
 
December 31, 2016
Stock Compensation
 
$
238,412

 
$
277,296

Bad Debt
 
25,523

 
46,790

Inventory reserve
 
50,234

 
53,121

Unrealized loss on investments
 
31,632

 
66,844

Deferred tax asset
 
$
345,801

 
$
444,051

 
 
 
 
 
Depreciation
 
$
271,871

 
$
367,490

Amortization
 
1,113

 
15,621

Goodwill
 

 

Deferred tax liability
 
$
272,984

 
$
383,111

 
 
 
 
 
Net Deferred Tax Asset
 
$
72,817

 
$
60,940