Note 16

Income Taxes:

	Years Ended December 31,
	2018			2017
Current:
Federal	$	-		$	64
State		39			11
		39			75
Deferred:
Federal		(282	)		(24	)
State		(21	)		78
		(303	)		54

Income tax (benefit) expense	$	(264	)	$	129

The provision for income taxes includes federal, state and local income taxes currently payable and deferred taxes resulting from net operating loss carryforwards and temporary differences between the financial statement and tax bases of assets and liabilities. Valuation allowances are recorded to reduce deferred tax assets when it is not more likely than not that a tax benefit will be realized.

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act made broad and complex changes to the U.S. tax code, including, but not limited to, reducing the U.S. federal corporate tax rate from 34 percent to 21 percent; eliminating the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; creating a new limitation on deductible interest expense; changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017; and limitations on the deductibility of certain executive compensation.

The difference between the actual income tax benefit and that computed by applying the U.S. federal income tax rate to pretax loss from continuing operations is summarized below:

	For the Years Ended December 31,
	2018			2017 (as restated)

Computed expected tax benefit	$	(902	)	$	(7,271	)
State tax expense (benefit), net of federal effect		688			(1,112	)
Warrant value fluctuation		43			(202	)
Tax Cuts and Jobs Act impact		-			23,933
Cancellation of debt		-			1,089
Other		79			125
Net decrease in valuation allowance		(172	)		(16,433	)
Provision for income taxes	$	(264	)	$	129

The computed expected tax benefit was calculated using the U.S. federal income tax rates of 21% and 34% for the years ended December 31, 2018 and 2017, respectively.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2018 and 2017 are as follows:

	December 31,
	2018			2017 (as restated)

Deferred tax assets/(liabilities):
Net operating loss carryforward	$	42,283		$	40,723
Intangible assets		3,340			4,595
Inventory		50			66
Reserves & accrued expenses		884			571
Property & equipment		(64	)		130
Non-cash compensation		620			793
Goodwill		(518	)		(414	)
Total net deferred tax assets		46,595			46,464
Less: valuation allowance		(46,706	)		(46,878	)
Net deferred tax assets/(liabilities)	$	(111	)	$	(414	)

The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based on the Company’s historical net losses, management does not believe that it is more-likely-than not that the Company will realize the benefits of these deferred tax assets and, accordingly, nearly a full valuation allowance has been recorded against the deferred tax assets as of December 31, 2018 and 2017. The Company’s valuation allowance against its deferred tax assets decreased by $172 and $16,433 for the years ended December 31, 2018 and 2017, respectively.

At December 31, 2018 and 2017, the Company has federal net operating loss carryforwards of approximately $187,229 and $181,033, respectively, to offset future taxable income expiring beginning in 2019 through 2037. The Company has experienced certain ownership changes which, under the provisions of Section 382 of the Internal Revenue Code of 1986, as amended, result in annual limitations on the Company’s ability to utilize its net operating losses in the future. The February 2014, July 2014, June 2015 and May 2018 equity raises by the Company, will limit the annual use of these net operating loss carryforwards. Although the Company has not performed a Section 382 study, any limitation of its pre-change net operating loss carryforwards that would result in a reduction of its deferred tax asset would also have an equal and offsetting adjustment to the valuation allowance.

FASB ASC 740 “Income Taxes” contains guidance with respect to uncertain tax positions which applies to all tax positions and clarifies the recognition of tax benefits in the financial statements by providing for a two-step approach of recognition and measurement. The first step involves assessing whether the tax position is more-likely-than-not to be sustained upon examination based upon its technical merits. The second step involves measurement of the amount to recognize. Tax positions that meet the more-likely-than-not threshold are measured at the largest amount of tax benefit that is, greater than 50%, likely of being realized upon ultimate finalization with the taxing authority.

The Company does not have any uncertain income tax positions or accrued penalties and interest. If such matters were to arise, the Company would recognize interest and penalties related to income tax matters in income tax expense. The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state, and foreign jurisdictions, where applicable. The Company’s tax years are still under open status from 2015 to present. All open years may be examined to the extent that net operating loss carryforward are used in future periods.

During 2017 the Company recognized the impact of the Tax Act related to the revaluation of deferred tax assets and liabilities from 34% to 21% in the amount of $23.9 million tax expense, which was primarily offset by a reduction in the valuation allowance.