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,
	2019		2018
Current:
Federal	$	-	$	-
State		41		26
Deferred:
Federal		-		-
State		-		-
Total provision for income taxes before valuation allowance	$	41	$	26
Change in valuation allowance		-		-
Total provision for income taxes	$	41	$	26

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

$’000

	December 31,
	2019			201 8
Deferred tax assets:
Accrued expenses	$	34		$	139
Net operating loss carryover		8,407			8,154
Goodwill and other intangibles		817			1,205
Deferred compensation		96			70
Depreciation		17			-
Deferred revenue		24			33
Lease liability		349			-
Other carryovers and credits		2			12
Total deferred tax assets		9,746			9,613

Deferred tax liabilities:
Prepaid expenses	$	(7	)	$	(7	)
Depreciation		-			(12	)
Right-of-use asset		(323	)		-
Total deferred tax liabilities		(330	)		(19	)
Valuation Allowance		(9,416	)		(9,594	)
Net deferred tax asset (liability)	$	-		$	-

December 31, 2019

and

2018,

we had net operating losses (“NOL”) of approximately

$37.1

million and

$35.1

million, respectively, to offset future taxable income. A portion of the Company's NOL's will begin to expire in

2027.

Utilization of the net operating loss and credit carryforwards

may

be subject to substantial annual limitations due to the "change in ownership" provisions of the Internal Revenue Code of

1986.

The annual limitation

may

result in the expiration of net operating losses and credit carryforwards before utilization.

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

December

31,2019,

and

2018.

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

2019,

the valuation allowance decreased by approximately

$0.2

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

2016

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

2016

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

21%

to income before taxes for the years ended

December 31, 2019

and

2018,

primarily as a result of the following:

	Year Ended December 31,
	201 9			201 8
Federal statutory rate		21.0	%		21.0	%
State tax, net of income tax benefit		24.9	%		2.4	%
Effect of permanent differences		(6.5	)%		13.9	%
Stock compensation		(21.0	)%		-	%
Change in valuation allowance		12.9	%		(36.3	)%
Total		31.3	%		1.0	%