Note 14 – Income Taxes

Successor

The Company files income tax returns in the U.S. Federal jurisdiction and various state jurisdictions.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company must assess the likelihood that our deferred tax assets will be recovered from future taxable income and, to the extent that it is more likely than not that such deferred tax assets will not be realized, the Company must establish a valuation allowance.

As of December 31, 2016, the Company has a valuation allowance against 100% of the deferred tax assets, which is primarily composed of net operating loss (or NOL) carryforwards. Even though the Company has reserved all of these net deferred tax assets for book purposes, the Company would still be able to utilize them to reduce future income taxes payable should the Company have future taxable earnings. To the extent the deferred tax assets relate to NOL carryforwards, the ability to use such NOLs against future earnings will be subject to applicable carryforward periods. As of December 31, 2016, the Company had NOL carryforwards for both Federal and state tax purposes of approximately $5.8 million, which are available to offset taxable income through 2036. Our NOL carryforwards begin to expire in 2028.

For the periods ended December 31, 2016 and 2015, there was no income tax expense recognized. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:

Predecessor

The Predecessor is a limited liability corporation and is classified as a partnership for income tax purposes. The Predecessor profits and losses are reportable by the members on their respective income tax returns. Accordingly, no provision for income taxes has been reflected in these financial statements for the Predecessor.