Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

Note 15 – Income Taxes

The provision for income taxes for the years ended December 31, 2018 and 2017 consists of the following:

	2018		2017
Current
Federal	$	766,070	$	1,015,724
State		-		-
		766,070		1,015,724
Deferred
Federal		-		-
State		-		-
Provision for income taxes	$	766,070	$	1,015,724

The following reconciles the Federal statutory income tax rate to the Company’s effective tax rate for the years ended December 31, 2018 and 2017:

	2018			2017
		%			%
Federal statutory rate		21.00			34.00
Permanent and other items		(5.81	)		(0.06	)
Beneficial conversion feature		-			(20.05	)
Federal income taxes audit and other adjustments		93.55			-
Rate change		-			(10.40	)
Change in valuation allowance		(102.77	)		(1.49	)
		5.97			2.00

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. In assessing the realizability of deferred tax assets, Management evaluates whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on Management’s evaluation, it is more likely than not that the deferred tax asset will not be realized and as such a valuation allowance has been recorded as of December 31, 2018 and 2017.

Deferred tax assets and liabilities are comprised of the following at December 31, 2018 and 2017:

	2018			2017
Deferred income tax assets:
Amortization	$	914,520		$	978,688
Net operating loss carryforward		19,567,649			5,244,000
Goodwill and intangible assets		-			(112,742	)
Allowance for doubtful accounts		703,873			259,110
Charitable contributions		593			618
Stock options		936,641			700,745
Accrued liabilities		390,041			121,993
Business interest expense		989,408			-
Deferred state tax asset		1,139,059			595,531
		24,641,784			7,787,943
Deferred income tax liabilities:
Depreciation		(2,301,605	)		(406,310	)
		-			(406,310	)
Deferred tax asset, net		22,340,179			7,381,633
Less: valuation allowance		(22,340,179	)		(7,381,633	)
Net deferred tax assets	$	-		$	-

On December 22, 2017, the Tax Cuts and Jobs Act (the “TCJA”) was signed into law. The TCJA includes a number of provisions impacting us, including the lowering of the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018 and 100% bonus depreciation for qualifying capital expenditures acquired and placed into service after September 27, 2017, among others.

Management has reviewed the provisions regarding assessment of their valuation allowance on deferred tax assets and based on that criteria determined that it should record a valuation allowance of $22.3 million and $7.4 million against its deferred tax assets as of December 31, 2018 and 2017, respectively. The Company has federal net operating loss carryforwards totaling approximately $93.4 million generated in 2018, 2017 and 2016. It also has various state net operating loss carryforwards that begin to expire in 2031. In November of 2016, the IRS commenced an audit of the Company’s 2015 Federal tax return, which was completed in 2018 (see Note 16).

The Company recognizes the consolidated financial statement impact of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than–not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company is subject to income taxes in the U.S. federal jurisdiction and the states of Florida, North Carolina, New Mexico, New Jersey, California and Tennessee. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply.