Income Taxes

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Note 6 - Income Taxes

For the years ended December 31 2014, and 2013, the Company recognized income tax expense of $278,697 and $2,828, respectively.

At December 31, 2014 and 2013, management believes there are no uncertain tax liabilities. The Company recognizes interest and penalties related to uncertain tax positions in income tax (benefit)/expense. No interest and penalties related to uncertain tax positions were accrued at December 31, 2014 or 2013.

The Company files income tax returns in U.S. federal jurisdiction and various states. There are currently no federal or state income tax examinations underway for these jurisdictions. The 2014 tax year remains open to examination by taxing jurisdictions to which the Company is subject.

Income tax provision for the periods December 31, 2014 and December 31, 2013 consists of the following:

	12/31/2014		12/31/2013
Current tax expense (benefit)
Federal	$	67,026	$	18,438
State		10,649		1,890
		77,675		20,328
Deferred tax expense (benefit):
Federal		185,106		(18,756)
State		15,916		1,256
		201,022		(17,500)
Total	$	278,697	$	2,828

The reconciliations of the results of applying the Company's effective statutory federal income tax rate of 35% for the years ended December 31, 2014 and December 31, 2013 to the Company's income before taxes and the Company's provision for income taxes are as follows:

	12/31/2014	12/31/2013
Federal income taxes	35.00%	35.00%
State income taxes	2.81%	2.18%
Permanent items	-2.29%	-9.60%
Current year losses not utilized	-61.04%	-27.90%
	25.51%	0.3%

The components of the deferred tax assets, net of deferred tax liabilities for each period are:

	12/31/2014		12/31/2013
Inventory	$	42,109	$	32,709
Allowance for doubtful accounts		32,132		26,506
Deferred revenue		72,646		111,069
Other		32,147		9,865
Valuation allowance		(167,394)		-
Current Deferred Tax Assets		11,640		180,149
Net operating loss		772,088		410,140
Foreign tax credits		29,211		-
Fair value of derivatives		58,097		179,030
Share based compensation		21,505		21,589
Property and equipment		22,366		-
Valuation allowance		(844,543)		(410,140)
Long term deferred tax assets		58,724		200,619
Total deferred tax assets		70,364		380,768
Unrealized gain on marketable securities		(13,295)		(41,137)
Prepaid expenses		(55,659)		(85,931)
Current deferred tax liabilities		(68,954)		(127,068)
Property & equipment		-		(43,853)
Goodwill and other intangibles		(1,410)		(8,825)
Long term deferred tax liabilities		(1,410)		(52,678)
Total deferred tax liabilities		(70,364)		(179,746)
Net Deferred tax asset	$	-	$	201,022

As of December 31, 2014, the Company has federal and state income tax net operating loss (NOL) carry forwards of $2,031,303 which will expire at various dates from 2032 through 2034. The NOLs are projected to expire as follows:

2032	$	434,814
2033		466,786
2034		1,129,703
	$	2,031,303

NOL from Predecessor Company

At December 31, 2014, approximately $8.208 million of net operating loss carry forwards for federal income tax purposes and approximately $8.208 million of net operating loss carry forwards for state income tax purposes, existed and were previously generated by a predecessor company. The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating loss and tax credit carry forwards if there has been a change of ownership as described in Section 382 of the Internal Revenue Code. According to a preliminary analysis performed by the Company, it was determined that these net operating loss carry forwards would not currently be available for utilization by the Company. As such, these net operating loss carry forwards which had previously been 100% allowed for, have been removed from the deferred tax assets. The availability of the net operating loss carry forwards may be analyzed further in future accounting periods. If a positive determination is made, the net operating loss carry forwards might then be reported as deferred tax assets of the Company.

NOL from iSatori

Based upon past financial performance, the company has not been able to utilize certain NOL carry forwards. In recognition of this risk, at December 31, 2014, and 2013, a valuation allowance of $844,543 and $410,140, respectively, has been recognized on the deferred tax assets relating to the net operating loss carry forwards. Should future financial performance change and it is determined the Company can realize the use of these net operating losses, the appropriate tax expense and equity adjustments will be made.

In addition to the valuation allowance offsetting the deferred tax assets arising from net operating loss carry forwards, at certain other deferred tax assets at December 31, 2014 have been reduced by a valuation allowance for the amount of any tax benefits which, more likely than not based on current circumstances, are not expected to be realized. Should the Company achieve sufficient, sustained income in the future, some or all of the valuation allowances may be reversed.