Entity information:
NOTE
12
- INCOME TAXES
 
Income tax provision consisted of the following for the years ended
December
31,
2016
and
2015
as follows:
 
 
 
December 31,
 
 
December 31,
 
 
 
2016
 
 
2015
 
                 
Current:
                
State   $
-
     $
(14
 )
Total current expense
    
-
      
(14
 )
                 
Deferred:
                
Federal    
8,161
      
5,247
 
State    
(2,734
 )    
1,888
 
Change in valuation allowance    
(6,386
 )    
(7,135
 )
Total deferred expense
    
(959
 )    
-
 
                 
Total income tax provision
   $
(959
 )   $
(14
 )
 
 
The income tax provision differs from the amount computed at federal statutory rates for the years ended
December
31,
2016
and
2015
as follows:
 
 
 
 
December 31,
 
 
December 31,
 
 
 
2016
 
 
2015
 
Income tax (expense) benefit at statutory rate
   $
(94
 )   $
12,375
 
                 
State income taxes (net of federal benefit)
    
1,356
      
801
 
Interest expense
    
(427
 )    
(427
 )
Equity-based expenses
    
8,554
     
(5,440
 )
Adjustment to state net operating loss carryforward
    
(3,017
 )    
-
 
Adjustment to book/tax difference in asset bases
    
(821
 )    
-
 
Change in valuation allowance
    
(6,386
 )    
(7,135
 )
Other
    
(124
 )    
(188
 )
                 
Income tax provision
   $
(959
 )   $
(14
 )
 
Deferred tax assets (liabilities) are comprised of the following at
December
31,
2016
and
2015:
 
 
 
December 31,
 
 
December 31,
 
 
 
2016
 
 
2015
 
Deferred tax assets:
                
Accruals and reserves   $
4,944
     $
4,448
 
Deferred revenue    
724
      
755
 
Net operating loss carryforwards
    
70,782
      
64,180
 
Depreciation and amortization
    
472
      
1,258
 
Other
    
263
     
158
 
Gross deferred tax assets
    
77,185
      
70,799
 
Less: valuation allowance
    
(77,185
 )    
(70,799
 )
Total deferred tax assets
    
-
      
-
 
                 
Deferred tax liabilities:
                
Indefinite lived intangible assets    
(959
 )    
-
 
Total deferred tax liabilities
    
(959
 )    
-
 
                 
Net deferred tax liabilities
   $
(959
 )   $
-
 
 
As a result of recurring operating losses, we have recorded a full valuation allowance against our net deferred income tax assets as of
December
31,
2016
and
2015,
as management was unable to conclude that it is more likely than not that the deferred income tax assets will be realized. During the years ended
December
31,
2016
and
2015,
the valuation allowance on deferred income tax assets increased by
$6,386
and
$7,135,
respectively.
 
We had federal net operating loss carryforwards of approximately
$194,000
and state net operating loss carryforwards of approximately
$107,000
at
December
31,
2016,
which are available to reduce future federal and state taxable income. The federal and state net operating loss carryforwards expire from
2021
through
2037.
If substantial changes in our ownership should occur, there would be an annual limitation of the amount of the net operating loss carryforwards which could be utilized.
 
We perform a review of our material tax positions in accordance with recognition and measurement standards established by authoritative accounting literature, which requires a company to determine whether it is more likely than not that a tax position will be sustained upon examination based upon the technical merits of the position.  If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.  Based upon our review and evaluation, during the years ended
December
31,
2016
and
2015,
we concluded that we had no unrecognized tax benefit that would affect our effective tax rate if recognized.
 
 
Pursuant to the guidelines of the recently issued ASU
2015
-
17
(“the Update”), all deferred income tax assets and liabilities are to be classified as non-current. The effective date of the Update for public companies is for annual periods beginning after
December
15,
2016
and later dates for all other entities. Early adoption is permitted. To comply with the guidance, the Company elected to adopt the Update for the annual period ending
December
31,
2016.
The guidance indicates that the Update
may
be applied either prospectively or retrospectively. The Company chose to apply the Update retrospectively.
 
 
The Company is subject to audit by the IRS and various states for tax years dating back to
2013
.
No
federal or state tax return are currently under audit.