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Notes to the Condensed Consolidated Financial Statements

 

1. Description of the Company

 

EZJR, Inc., ("the Company" or the "Registrant" or "EZJR") was incorporated on August 14, 2006 under the laws of the State of Nevada as IVPSA Corporation ("IVP"). The Company was incorporated as a subsidiary of Eaton Laboratories, Inc., a Nevada corporation.

EZJR is an Internet marketing company headquartered in Las Vegas, Nevada. The Company has one wholly owned subsidiary, Her Marketing Concepts, Inc. ("Her Marketing"), a Nevada Corporation.  The primary purpose of Her Marketing is to purchase various media for customer and lead generation.  Additionally, Her Marketing acts as a conduit for the implementation and management of the Media Investor Purchase Agreement described below.  The Company's primary business is to improve the sales performance of brands, products and services by way of its proprietary e-commerce platform. The Company's unique methodology minimizes the cost of generating leads and then maximizes the conversion of those leads into customers. After the initial sale, EZJR utilizes a process for monetizing customers to the greatest extent possible through up sales, down sales and cross sales.

On July 25, 2008, EZJR, a Nevada corporation and IVPSA Corporation, entered into an Acquisition Agreement and Plan of Merger. Immediately upon the effectiveness of the merger, the original EZJR ceased to exist.

 

In January 2012, the Company entered into a two-step transaction with OwnerWiz Realty Inc. ("OWR"), a privately held Georgia corporation. The first step of the transaction occurred in January 2012, when an entity owned by the shareholders of OWR and parent company of OW Marketing, Inc. ("OWM") acquired seven million five hundred thousand (7,500,000) common stock shares of EZJR, approximately 95.25% of the then outstanding common stock shares of EZJR totaling 7,873,750 shares from the then two major shareholders in a private transaction. The second step of the transaction occurred on March 1, 2012, when the Company, EZJR Acquisition Corporation ("Sub"), a Nevada corporation and subsidiary of the Company and OWR, entered into a Share Exchange Agreement and Plan of Merger "Share Exchange" pursuant to which the Sub was merged with and into OWR, with OWR surviving as a wholly-owned subsidiary of the Company. The Company acquired all of the outstanding capital stock of OWR in exchange for issuing 390,000 shares of the Company's common stock, which were issued to two shareholders of OWR. Since the former shareholders of OWR owned over 95% of the outstanding common stock of the Company upon consummation of the Share Exchange, the transaction was recorded as a reverse merger and resulted in a recapitalization with OWR being the acquirer for accounting purposes.

 

On January 28, 2014, the Company acquired Leading Edge Financial ("LEF"), a private Florida corporation engaged in the business of personal credit management in a stock exchange transaction whereby the Company exchanged 4,585,000 shares of restricted common stock in exchange for 100% of the stock of LEF.

On April 22, 2015, the Company incorporated Her Marketing Concepts, Inc. ("Her Marketing"), a Nevada Corporation, as a wholly owned subsidiary.  The primary purpose of Her Marketing is to purchase various media for customer and lead generation.

On May 15, 2015, the Company entered into an agreement with AdMaxOffers.com LLC ("Admax"), a shareholder and beneficial owner of the Company to sell all of its ownership interest in OWR and LEF in exchange for Admax returning to the Company 650,000 shares of its common stock (valued at $422,500 at the time of the transaction).  Pursuant to this divesture transaction, the majority of the assets and obligations of OWR, LEF, and OWM are no longer the assets and obligations of the Company.  As part of the sale of these subsidiaries to Admax, Admax agreed to assume the liabilities for all compensation owed to both the Company's former Chief Technology Officer and the then Chief Executive Officer  In turn, the Company agreed to assume the following liabilities of OWM and LEF:  1) estimated unpaid payroll taxes of $6,665 plus estimated late fees of $1,033; 2) remaining administrative fees and other fees owed under an Assurance of Voluntary Compliance pursuant to the Fair Business Practice Act with the State of Georgia of approximately $10,000; 3) a customer refund for $1,500; and 4) a $25,000 note payable plus unpaid interest.  Additionally, the Company agreed to reimburse Edward Zimbardi and Brenda Zimbardi up to $10,000 for legal fees that they may incur to defend against lawsuits related to any legal decisions that they took on behalf of the Company while serving as an officer of the Company or any of its subsidiaries at the time.

 

 

 

 

 

 

 

 

For the three months ended March 31, 2015, the operations of OWR, LEF and OWM are accounted for as discontinued operations.

Agreement with Her Holding, Inc.

As of October 1, 2014, the Company entered into a Marketing and Selling Agreement (the "Agreement") with Her Imports, LLC ("Her"), aretailer of human hair extensions and related products. Under the agreement,the Company was to custom design Her's ecommerce Websites and generate customer leads through email marketing campaigns, online advertising and social media and various affiliate marketing campaigns. Finally, the Company was to sell Her's products as well as other products to these customers. As part of the Agreement, the Company purchased Her's inventory that was on hand at September 30, 2014 in exchange for a Secured Promissory Note. The Company intends to enter into similar agreements with other brands and retailers some of who will pay a commission to the Company based on the sales generated.

 

In addition to the Company selling the Her products online, Her's products are sold at independent retail store locations. As part of the agreement with Her, the Company reimburses Her for the expenses of these store locations, employee costs, connectivity expenses and certain other expenses as agreed upon. All retail store sales are made by the Company and are processed through a Point-of-Sale (POS) system implemented by the Company. Additionally, the Company reimburses Her for specific customer service costs, warehousing and fulfillment expenses. Finally, the Company pays Her a 10% royalty on net sales. In return, Her provides the Company with assistance in developing and sourcing of products, promotion of products, employee training, customer service and high level store management.  On November 14, 2014, the agreement was modified to allow any payments made by the Company on behalf of Her to be offset against any royalty payments.  Effective September 1, 2015, the Company issued 4,000,000 shares of restricted common stock valued at $2,200,000 to Her Holding in exchange for a reduction in the royalty cash paymentsto 2.5%.  Additionally, the Company agreed to pay for certain connectivity, telephony and customer services expenses that heretofore were paid by Her.

 

During the three months ended March 31, 2016 and 2015, sales of Her Import products accounted for substantially all of the Company's revenues and operating profits.

eCommerce Platform

 

On May 28, 2014, the Company entered into an Asset Purchase Agreement with Leader Act Ltd HK, ("Leader") a private Hong Kong corporation to purchase an ecommerce Platform ("Platform") software program developed and owned by Leader. The Platform entails all aspects of interaction that a company has with its customer, whether it is sales or service-related, provides a greater understanding of the customer and helps manage customer data and all interaction with the customer. Under the terms of the Asset Purchase Agreement, Leader agrees to service and maintain the software for a period of two years. Subsequently, Leader will be paid to service and maintain the software. For the Platform and service and maintenance, the Company issued Leader 10,000,000 restricted shares of common stock valued at $0.05 per share. For financial reporting purposes, $350,000 of the purchase price was allocated to the Platform and $150,000 was allocated to the software maintenance agreement, which was booked as a prepaid at the date of the acquisition and is being amortized on a straight-line basis over the two-year term of the agreement.

Media Investor Purchaser Agreement

 

On June 29, 2014, the Company entered into a Media Investor Purchaser Agreement ("MIP") with Leader. Under the terms of the MIP Agreement, Leader undertakes the responsibility to provide the investment dollars of the "media purchase" for customer and lead generation and to manage this process. In doing so, Leader will create the offers, spend the funds necessary to purchase various media and manage the overall process. The Company's current on-line offers are focused in the financial services industry, representing credit monitoring and management. Leader is also responsible for graphic design, Website design and various other programming expenses. The net revenue from the media purchase will be shared with each party receiving 50 percent after the deduction of certain costs and expenses including the media purchase, merchant fees, product costs, and affiliate fees. Under the agreement the Company will be responsible for customer service, network costs, accounting and other general and administrative costs. Leader can advance the Company up to $500,000, which may be converted, into a total of 10,000,000 restricted common shares of the Company's stock at the fixed price of $0.05 per share. Once Leader has acquired the 10,000,000 shares of the Company's stock ownership, the MIP Agreement is no longer in force. Leader had previously advanced the Company the sum of $50,000 for media purchases. On June 26, 2014, these funds were used to purchase 1,000,000 restricted shares of the Company's common stock at $0.05 per share. Since September 30, 2014 there has been no activity related to the MIP agreement as the Company has been focusing its marketing efforts on the agreement with Her Imports. However, the Company anticipates that the MIP program will be reactivated at some point in the future.

 

 

 

 

 

 

 

 

 

Certain reclassifications have been made to the prior year's condensed consolidated financial statements to conform to the current year's presentation.  These reclassifications had no effect on previously reported results of operations.  The Company reclassified certain expense accounts to conform to the currents year's treatment.

2. Summary of Significant Accounting Policies

 

 

The condensed consolidated financial statements include the accounts of the Company (a Nevada Corporation) and its whollyowned subsidiary, Her Marketing Concepts, Inc. All significant intercompany transactions have been eliminated in consolidation.

 

The accompanying unaudited condensed consolidated financial statements of the Company are prepared by management on the accrual basis of accounting and in accordance with principles generally accepted in the United States of America ("GAAP") for interim financial information as contained in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC"), and in conjunction with rules and regulations of the SEC. Certain information and footnote disclosures required for annual financial statements have been condensed or excluded pursuant to SEC rules and regulations. Accordingly, the unaudited condensed consolidated financial statements do not include all of the information and footnotes required by the US GAAP for complete financial statements. The unaudited condensed consolidated financial statements include accounts and related adjustments, which are, in the opinion of management, of a normal recurring nature and necessary for a fair presentation of the Company's financial position, results of operations and cash flows for the interim period. Operating results for the three months ended March 31, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016. These unaudited condensed consolidated financial statements should be read in conjunction with the condensed consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2015.

The condensed consolidated balance sheet as of December 31, 2015 contained herein has been derived from the audited consolidated financial statements as of December 31, 2015, but do not include all disclosures required by the US GAAP.

The preparation of condensed consolidatedfinancial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures.  Management uses its historical records and knowledge of its business in making estimates.  Accordingly, actual results could differ from those estimates.

 

 

 

 

 

 

 

As described in Note 1, above, on May 15, 2015 the Company soldthree whollyowned subsidiaries as part of an exchange of stock.  For financial reporting purposes the sale of these entities is reported as discontinued operations for the three months ended March 31, 2015.

 

The Company considers deposits that can be redeemed on demand and investments that have original maturities of less than three months, when purchased, to be cash equivalents. As of March 31, 2016 and December 31, 2015, the Company's cash and cash equivalents were on deposit in federallyinsured financial institutions, and at times may exceed federally insured limits.

 

 

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash deposits. The Federal Deposit Insurance Corporation (FDIC) insures deposits up to $250,000 for any single account at the Company's financial institutions.  From time-to-time one or more of the Company's bank accounts may exceed the FDIC insurance limits.

 

 

Accounts receivable represent balances related to products sold for which the Company had not received the related funds from various financial institutions as of the reporting period. Interest is not accrued on accounts receivable and all receivables were received within one week of the end of the reporting period and, as such, the Company has no allowance for doubtful accounts as of March 31, 2016 and December 31, 2015.

 

 

The Company measures fair value based on the prices that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value measurements are based on a three tier hierarchy that prioritizes the inputs used to measure fair value, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3).

  

The Company did not have any assets measured at fair value on a recurring basis at March 31, 2016 or December 31, 2015.

The Company believes the carrying amounts of cash and cash equivalents, accounts receivable, other current assets, accounts payable, accrued salaries, wages and payroll taxes, and other accrued expenses are a reasonable approximation of the fair value of those financial instruments because of the nature of the underlying transactions and the short-term maturities involved.

 

Inventory is booked at cost on a FIFO basis plus incoming shipping charges. The Company evaluates the carrying value of inventory to determine if the carrying value is recoverable at estimated selling prices. To the extent that estimated selling prices do not exceed the associated carrying values, inventory carrying amounts are written down. In addition, the Company inventory on hand or committed with suppliers, that is not expected to be sold within the next 12 months, is considered as excess and thus appropriate write-downs of the inventory carrying amounts are established through a charge to cost of revenues. Significant reductions in product pricing, or changes in technology and/or demand may necessitate additional write-downs of inventory carrying value in the future.

 

Deposits consists of the following:

 

		March 31,				December 31,
		2016				2015
Deposits on Products		$	284,888			$	-
Security Deposits			21,428				17,780
Total		$	306,316			$	17,780

 

 

 

 

 

 

 

 

Effective September 1, 2015, the Company issued 4,000,000 shares of restricted common stock valued at $2,200,000 to Her Holding in exchange for a reduction in the royalty cash payments to 2.5%.  Additionally, the Company agreed to pay for certain connectivity, telephony and customer service expenses that heretofore were paid by Her.  For financial statement reporting purposes, the value of the stock paid to Her was treated as an intangible asset to be amortized into expense until such time as the reduction in royalties paid totals $2,200,000.  During the three months ended March 31, 2016, amortization of the intangible asset was $286,496.  The amount of intangible asset amortized is calculated by taking the difference between the royalty calculation at previous royalty rate of 10% and the new rate of 2.5%.

 

Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows:

 

Furniture and fixtures	5 years
Computers and equipment	3 years
Software	5 years
Leasehold improvement	remaining life of the lease

 

Product Sales

 

The Company, through the Her Imports store locations and its eCommerce Website, www.herimports.com, sells a variety of hair extensions and related products. In the stores, customers pay for the products using either cash, a debit card or a credit card. In the case of cash sales at the store, the store manager makes a nightly deposit of the cash, rounded down to a dollar. For cash sales, the Company recognizes the sale when the deposit is recorded into the Company's account by the bank. For credit card and debit sales, the Company recognizes the sale when the card is charged.

 

Product sales on the Website are paid for using either debit cards, credit cards, PayPal or an independent financing company. Sales for Website product sales are recognized upon shipment of the product.

The Company recognizes revenue from product sales and services once all of the following criteria for revenue recognition have been met: persuasive evidence that an agreement exists; the services have been rendered; the fee is fixed and determinable and not subject to refund or adjustment; and collection of the amount due is reasonably assured.

 

On May 28, 2014, the Company purchased, for restricted shares of common stock, an eCommerce software program. The value of the software is amortized over five years. The Company makes judgments about the value of this long-lived asset whenever events or changes in circumstances indicate that an impairment in the remaining value of the assets recorded on the balance sheet may exist. In order to estimate the fair value of long-lived asset, the Company typically makes various assumptions about the future prospects for the business that the asset relates to, considers market factors specific to that business and estimates future cash flows to be generated by that business. These assumptions and estimates are necessarily subjective and based on management's best estimates based on the information available at the time such estimates are made. Based on these assumptions and estimates, the Company determines whether it needs to record an impairment charge to reduce the value of the asset stated on the balance sheet to reflect its estimated fair value determined by a discounted cash flow analysis. The Company has not recognized any impairment charges related to software during the periods ended March 31, 2016 and March 31, 2015.

 

 

The Company accounts for income taxes under the liability method in accordance with FASB ASC 740-10.  Under this standard, deferred income tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using the enacted tax rates expected to be in effect for the year in which the differences are expected to reverse.  Deferred income tax assets are reduced by a valuation allowance when the Company is unable to make the determination that it is more likely than not that some portion or all of the deferred income tax asset will be realized.

 

 

 

 

 

 

 

 

 

 

 

The Company utilizes FASB ASC 260.  Basic earnings per share is computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Common equivalent shares are excluded from the computation if their effect is anti-dilutive.

 

 

The Company records stock-based compensation issued to external entities for goods and services at either the fair market value of the shares issued or the value of the services received, whichever is more readily determinable, using the measurement date guidelines enumerated in FASB ASC 505-50-30.

ASU 2015-14

In August 2015, the FASB issued ASU No. 2015-14, Revenue From Contracts With Customers (Topic 606)." The amendments in this ASU defer the effective date of ASU 2014-09. Public business entities should apply the guidance in ASU 2014-09 to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. We are still evaluating the effect of the adoption of ASU 2014-09.

ASU 2015-11

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurement of Inventory (Topic 330)." ASU 2015-11 simplifies the accounting for the valuation of all inventory not accounted for using the last-in, first-out ("LIFO") method by prescribing that inventory be valued at the lower of cost and net realizable value. ASU 2015-11 is effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016 on a prospective basis. We do not expect the adoption of ASU 2015-11 to have a material effect on our financial position, results of operations or cash flows.

ASU 2015-05

In April 2015, the FASB issued ASU 2015-05, "Intangibles - Goodwill and Other - Internal-Use Software (Subtopic 350-40)." ASU 2015-05 provides guidance regarding the accounting for a customer's fees paid in a cloud computing arrangement; specifically, about whether a cloud computing arrangement includes a software license, and if so, how to account for the software license. ASU 2015-05 is effective for public companies' annual periods, including interim periods within those fiscal years, beginning after December 15, 2015 on either a prospective or retrospective basis. Early adoption is permitted. We do not expect the adoption of ASU 2015-05 to have a material effect on our financial position, results of operations or cash flows.

ASU 2015-03

In April 2015, the FASB issued ASU No. 2015-03, "Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-03 to have a material effect on our financial position, results of operations or cash flows.

ASU 2015-02

In February 2015, the FASB issued ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis," which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). The ASU focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification and improves current U.S. GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity ("VIE"), and changing consolidation conclusions for companies in several industries that typically make use of limited partnerships or VIEs. The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.

The Company has evaluated other recent pronouncements and believes that none of them will have a material impact on the Company's financial position, results of operations or cash flows.

 

 

 

 

 

 

 

 

 

3.  Discontinued Operations

On May 15, 2015, the Company completed the sale of all of the issued and outstanding stock of OwnerWiz Realty Inc., OwnerWiz Management, Inc., and Leading Edge Financial, Inc to Admax.com LLC, a shareholder and beneficial owner of the Company in exchange for 650,000common stock shares of the Company. All non-recurring costs associated with these dispositions have been included as discontinued operations in the condensed consolidated financial statements.

 

The Company's results from discontinued operations are summarized below. These operating results for the three month ended March 31, 2015 do not necessarily reflect what they would have been had these three previous subsidiaries not been classified as discontinued operations.

		Three Months Ended
		March 31, 2015
Product sales		$	57,500
Referral fees			5,875
Cost of products sold			(5,568	)
Commission expense			(15,464	)
Selling expense			(37,835	)
General and administrative expenses			(66,899	)
Interest expense			(31,800	)
Loss from discontinued operations		$	(94,191	)

 

4. Property and Equipment

 

Property and equipment consisted of the following:

		March 31,				December 31,
		2016				2015
Software		$	359,315			$	356,005
Computers and equipment			41,393				38,610
Furniture			22,350				21,197
Leasehold improvements			11,793				11,354
			434,851				427,166
Accumulated depreciation and amortization			(143,604	)			(120,010	)
Property and equipment, net		$	291,247			$	307,156

Depreciation and amortization expense on property, plant and equipment for the three months ended March 31, 2016 and 2015 was $23,594and $17,500, respectively.

5. Related Party Transactions

 

As discussed in Note 1, above, on September 1, 2015, the Company issued 4,000,000 shares of common stock to Her resulting in Her having a 12.2% interest in EZJR.  At March 31, 2016 and December 31, 2015, the Company had a receivable balance of $344,782and $88,577, respectively, from Her related to payments made by the Company and on behalf of Her, partially offset by royalties earned by Her under Marketing and Selling Agreement with Her also described in Note 1.

 

 

 

 

 

 

 

6. Commitments and Contingencies

 

On April 27, 2015, the Company renewed for two years its sublease agreement, effective May 1, 2015, for its corporate office.  Under the terms of the sublease the Company pays $925 per month and is responsible to pay its own expenses for utilities, taxes, insurance and repairs.  Future lease payments related to the Company's office leases as of March 31, 2016are as follows:

Year		Amount
2016		$	8,275
2017			11,100
2018			3,700
Total		$	23,075

 

 

As of March 31, 2016, the Companyhad only eight qualified vendors that provide it with its hair extension products. Quality among these vendors can vary greatly between orders.  Should any of these vendors fail to deliver quality products to the Company on a timely basis, our operations could be adversely affected. The Companyis actively attempting to source additional qualified vendors but there can be no assurance that it will succeed in this effort.

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company's business.On or about September 5, 2015 the Company received a summons naming it in a civil action against Her Imports, LLC, Her Imports New York, LLC, Her Holding, Inc. and EZJR, Inc. from a former independent contractor of Her Imports, LLC.  The complaint claims unpaid wages and overtime wages in violation of New York Labor Law, among other things.  No specific damages are mentioned in the complaint.  The Company subsequently answered the complaint and denied any wrongdoing as EZJR has no relationship with the contractor, whatsoever.At this point in the litigation it is impracticable to foresee the outcome, however, the Company believes it has meritorious defense and is vigorously defending this litigation.

 

7. Promissory Notes

 

As discussed in Note 1, above,on May 15, 2015, the Company entered into an agreement with AdMaxOffers.com LLC ("Admax"), a shareholder and beneficial owner of the Company to sell all stock inOWR and LEF in exchange for Admax returning to the Company 650,000 shares of common stock of the Company.  As part of the agreement the Company assumed a $25,000 Note payable plus unpaid interest.Through September 30, 2015 unpaid interest on the note was $15,375.  On September 30, 2015, the Company entered into a Settlement Exchange Agreement with the noteholders for a new note with a face value of $30,000 and twelve monthly payments due of $2,500.  Assuming an implied interest rate on the new note of 6.5%, the difference between the payments due and the amount of the previous note plus accrued interest was $10,405 which has been recognized as other income at the time of the settlement.  As of March 31, 2016, the remaining outstanding balance was $14,720.

 

8. Income Taxes

The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax of multiple state jurisdictions. An estimated blended tax rate of 38.25% has been used to calculate the provision for taxes based on income for the three months ended March 31, 2016 and 35% for the three months ended March 31, 2015.  For financial reporting purposes the provision for income taxes is based on pre-tax income of $228,969 and $456,520 for the three months ended March 31, 2016 and 2015, respectively, andconsisted of the following:

		Three Months Ended				Three Months Ended
		March 31,				March 31,
		2016				2015
U.S. Federal		$	76,178			$	159,325
U.S. State			11,448				-
Total			87,626				159,325
Deferred			-				-
Total provision for income taxes		$	87,626			$	159,325

 

 

 

 

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