On December 22, 2017, tax reform legislation known as the Tax Cuts and Jobs Act (the “Tax Legislation”) was enacted in the United States (the “U.S.”). The Tax Legislation significantly revises the U.S. corporate income tax by lowering the statutory corporate tax rate to 21%, among other changes.

The Company has preliminarily accounted for the effects of the Tax Legislation and estimate that our effective tax rate exclusive of discrete items is 9.5% for 2018 because taxable income exclusive of discrete items should be mostly offset by net operating loss carry forwards. Tax expense based on the estimated annual effective tax rate was $710,000 for the nine months ended September 30, 2018, however, this amount is partially offset by a tax benefit on discrete items of $470,000 for the nine months ended September 30, 2018 which is related to excess tax deductions for non-qualified stock options exercised. Due to uncertainties in estimating our taxable income after 2018, we cannot determine that it is more likely than not that net operating loss carry forwards and other deferred tax assets will be utilized after 2018.

Our income tax provision for the three and nine months ended September 30, 2018 was $200,000 and $240,000, respectively, and was $0 and $0 for the three and nine months ended September 30, 2017, respectively.