Annual report pursuant to section 13 and 15(d)

INCOME TAXES

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INCOME TAXES
 12 Months Ended
Dec. 31, 2013
Income Tax Disclosure [Abstract]  
INCOME TAXES

The components of the provision (benefit) consist of the following:

  2013   2012
Current:              
   Federal $ 14,491     $ (51,655 )
   State   20,164       —    
Total current $ 34,655     $ (51,655 )
               
Deferred:              
   Federal   (129,228 )     (290,168 )
   State   (8,117 )     —    
   Change in valuation allowance   172,457       —    
Total deferred $ 35,112     $ (290,168 )
Provision (benefit) for income taxes $ 69,767     $ (341,823 )

 

The income tax provision (benefit)differs from that computed at the federal statutory corporate income tax rate as follows for years ended December 31, 2013 and 2012:

 

  2013   2012
   Tax (provision) benefit computed at the federal statutory rate $ 215,249     $ 97,966  
   State income tax (provision), net of federal benefit   18,600       —    
   Research and development tax credits   (166,522 )     11,639  
   Other   (170,017 )     (109,605 )
   Change in valuation allowance   172,457       (341,823 )
          Income tax provision (benefit) $ 69,767     $ (341,823 )

 

The tax effects of significant temporary differences representing net deferred tax assets and liabilities consisted of the following at December 31, 2013 and 2012:

 

  2013   2012
Deferred tax assets:              
   Fixed assets $ (47,278 )   $ 37,515  
   Intangible assets   202,737       (35,651 )
   Research and development tax credits   111,150       31,802  
   Foreign tax credits   221,443       48,986  
   Inventories   11,887       11,513  
   Bad debt reserve   13,287       —    
   Accrued expenses   14,894       —    
   Unrealized foreign currency translation   157,077       —    
   Accounts receivable   —         15,478  
   Net operating losses   —         255,982  
   Employee benefits   —         17,832  
   Share based compensation   —         6,616  
   Other   34       736  
Total gross deferred tax assets   685,231       390,809  
Less: valuation allowance   (221,443 )     (48,986 )
Net deferred tax assets $ 463,788     $ 341,823  
               

 

In accordance with ASC Topic 740, the Company analyzed its valuation allowance at December 31, 2013 and determined that, based upon available evidence, it is more likely than not that certain of its deferred tax assets may not be realized and, as such, has established a valuation allowance against certain deferred tax assets. These deferred tax assets include federal research and development credits and foreign tax credit carryforwards.

 

The statute allowing a federal research and development credit (the “R&D Credit”) expired for years beginning after December 31, 2011. Congress renewed the R&D Credit for the years 2012 and 2013 with the American Taxpayer Relief Act of 2012 (the “Act”). Accounting guidance required that the effects of a change in tax law be recognized in the period that includes the enactment date. For U.S. federal tax purposes, the enactment date of the Act is the date the President signs the bill into law. The President did not sign the Act into law until January 2, 2013. The total amount of the federal R&D credit benefit in 2013 and 2012 was $33,254 and $0, respectively.

 

As of December 31, 2013, the Company had foreign tax credits of $221,443. The foreign tax credits will be used in the future to offset federal income tax owed.