Note

– Income Taxes

Income taxes are recognized for the amount of taxes payable or refundable for the current year and deferred tax liabilities and assets are established for the future tax consequences of events that have been recognized in our consolidated financial statements or tax returns. The effects of income taxes are measured based on enacted tax laws and rates.

The provision for income taxes from continuing operations consists of the following (in

$’000

	Year Ended December 31,
	2018		2017
Current:
Federal	$	-	$	-
State		26		19
Deferred:
Federal		-		(6	)
State		-		(4	)
Total provision for income taxes before valuation allowance	$	26	$	9
Change in valuation allowance		-		-
Total provision for income taxes	$	26	$	9

The significant components of our deferred tax assets and liabilities are as follows (in

$’000

	December 31,
	2018			201 7
Deferred tax assets:
Accrued expenses	$	139		$	65
Net operating loss carryover		8,154			8,792
Goodwill and other intangibles		1,205			1,665
Deferred compensation		70			135
Depreciation		-			39
Other carryovers and credits		12			12
Total deferred tax assets		9,580			10,708

Deferred tax liabilities:
Prepaid expenses	$	(7	)	$	(20	)
Depreciation		(12	)		-
Deferred revenue		33			-
Total deferred tax liabilities		14			(20	)
Valuation Allowance		(9,594	)		(10,688	)
Net non-current deferred taxes	$	-		$	-

December 31, 2018

and

2017,

we had net operating losses (“NOL”) totaling

$35.1

million and

$37.7

million, respectively, to be carried forward

years to offset future taxable income and any unused NOL will begin to expire in

2027.

We do

not

believe our net operating loss will be limited under Internal Revenue Code (“IRC”) Section

382

and believe it will also be available for state income tax purposes subject to state carryforward limitations. IRC Section

382

limits the utilization of net operating loss in years subsequent to an owner shift based upon the value of the Company at the date of the owner shift. We have

not

undertaken a detailed study in connection with IRC Section

382

in order to determine if there is any limitation of the utilization of its net operating loss carryforward. If IRC Section

382

limitation were deemed to apply, our gross deferred tax asset and its corresponding valuation allowance could be reduced. The

2017

Tax Cuts and Jobs Act revised the use of net operating loss carryforwards and limits them to

80%

of taxable income each year, but removed the limitation on years carried forward.

Our provision for income taxes reflects the establishment of a full valuation allowance against deferred tax assets as of

December

31,2018

and

2017.

Accounting Standards Codification Topic

740

Income Taxes

requires management to evaluate its deferred tax assets on a regular basis to reduce them to an amount that is realizable on a more likely than

not

basis. During

2018,

the valuation allowance decreased by approximately

$1.1

million due to continuing operations. In determining our provision/(benefit) for income taxes, net deferred tax assets, liabilities and valuation allowances, we are required to make judgments and estimates related to projections of profitability, the timing and extent of the utilization of net operating loss carryforwards and applicable tax rates. Judgments and estimates related to our projections and assumptions are inherently uncertain; therefore, actual results could differ materially from the projections.

We have adopted the provisions of the guidance related to accounting for uncertainties in income taxes. We have analyzed our current tax reporting compliance positions for all open years and have determined that it does

not

have any material unrecognized tax benefits. Accordingly, we have omitted the tabular reconciliation schedule of unrecognized tax benefits. We do

not

expect a material change in unrecognized tax benefits over the next

months. All of our prior federal and state tax filings from the

2015

tax year forward remain open under statutes of limitation. Operating losses generated in years prior to

2015

remain open to adjustment until the statute closes for the tax year in which the net operating losses are utilized.

The Company’s provision for income taxes attributable to continuing operations differs from the expected tax benefit amount computed by applying the statutory federal income tax rate of

34%

to income (loss) before taxes for the years ended

December 31, 2018

and

2017,

primarily as a result of the following:

	Year Ended December 31,
	201 8		201 7
Federal statutory rate	21.0	%	34.0	%
State tax, net of income tax benefit	2.4	%	4.0	%
Effect of permanent differences	13.9	%	11.0	%
Change in valuation allowance	(36.3	)%	(48.0	)%
Total	1.0	%	1.0	%