Income tax computed at the federal statutory rate reconciled to the effective tax rate is as follows for the years ended December 31, 2016 and 2015:

OrangeHook MN assesses the potential realization of net deferred tax assets on an annual basis, or on an interim basis if the circumstances warrant. If OrangeHook MN's actual results and updated projections vary significantly from the projections used as a basis for this determination, OrangeHook MN may need to increase or decrease the valuation allowance against the gross deferred tax assets. OrangeHook MN would adjust its valuation allowance in the period the determination was made. OrangeHook MN considers projected future taxable income and ongoing tax planning strategies and then records a valuation allowance to reduce the carrying value of the net deferred taxes for amounts that are unable to be realized. For the years ended December 31, 2016 and 2015, OrangeHook MN recorded a change in the valuation allowance of $3,223 and $1,446, respectively, as OrangeHook MN believes it is not more-likely-than-not to realize the benefit of the deferred tax asset.

Below is a summary of deferred income tax assets and liabilities as of December 31, 2016 and 2015.

As of December 31, 2016, OrangeHook MN has the following federal and state net operating losses and research and development credit carryforwards:

OrangeHook MN's ability to utilize a portion of its net operating loss carryforwards to offset future taxable income may be subject to certain limitations under Section 382 of the Internal Revenue Code due to changes in the equity ownership of OrangeHook MN. OrangeHook MN has not performed an analysis to determine if an ownership change has occurred.

In connection with the acquisition of LifeMed in 2016, the purchase accounting included a net increase of deferred tax assets of $1,780, which includes primarily federal and state net operating loss ("NOL") carryforwards and amortization of intangibles.  It is not more likely than not the assets will be realized and OrangeHook MN has recorded a full valuation allowance against those assets.   

In connection with the merger with Nuvel in 2016, there were not any deferred tax assets acquired. The allocation of the purchase price included definite-lived intangible assets of $5,824.  There is a temporary difference creating a deferred tax liability of $2,122 due to future amortization.  In accordance with ASC 740 "Accounting for Income Taxes", OrangeHook MN can evaluate its valuation allowance based on attributes of the acquired company.  As a result, this reduced the valuation allowance by $2,122 and is recorded as a tax benefit in the accompanying consolidated statements of operations for the year ended December 31, 2016.

During 2015, OrangeHook MN recorded additional deferred tax assets primarily related to the acquisition of Salamander Technologies, Inc. The net increase was $382 which includes a research and development ("R&D") credit carryforward, a net operating loss ("NOL") carryforward and amortization of intangibles.

We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position. 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 fifty percent likelihood of being realized upon ultimate settlement with the relevant tax authority. As of December 31, 2016, and 2015, we did not have any material uncertain tax positions.

It is our practice to recognize interest and penalties related to income tax matters as a component of income tax expense in the consolidated statements of operations. There have been no interest or penalties incurred for the years ended December 31, 2016 and 2015.