11. Income Taxes

The Company accounts for income taxes under ASC Topic 740 —Income Taxes ("ASC 740"). Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company's loss before income taxes was $5,709, $2,536, and $1,516 for the years ended December 31, 2016, 2015 and 2014, respectively, and the Company has no foreign sources of income or loss.

The expense (benefit) for income taxes consists of the following:


	Years Ended December 31,
	2016		2015		2014
Current:
US federal	$	(4)	$	3	$	1
State and local		47		35		12
Total current income tax expense		43		38		13
Deferred:
US federal		440		278		(410)
State and local		58		12		(12)
Total deferred income tax expense		498		290		(422)
Total income tax expense (benefit)	$	541	$	328	$	(409)

For the years ended December 31, 2016, and 2015 the Company had an effective tax rate of (9.5)% and (12.9%), respectively, primarily related to deferred tax expense associated with indefinite-lived deferred tax liabilities for goodwill amortization. For the year ended December 31, 2014, the Company had an effective tax rate of 27.0% primarily related to the reversal of a portion of the valuation allowance as a result of deferred tax liabilities that were recorded in connection with the acquisition of SMPP (see Note 4), which created a source of recoverability of a portion of previously reserved deferred tax assets.

As of December 31, 2016, the Company had federal net operating loss ("NOL") carryforwards of $13,964 and state NOL carry forwards of $11,066, each of which are available to reduce future taxable income. The NOL carryforwards, if not utilized, will begin to expire in 2029 for federal purposes and in 2021 for state purposes.

The NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. The NOLs may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will generally be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.

The tax benefits of uncertain tax positions are recognized only when the Company believes it is more likely than not that the tax position will be upheld on examination by the taxing authorities based on the merits of the position. The Company recognizes interest and penalties, if any, related to unrecognized income tax benefits in income tax expense. Through December 31, 2016, the Company had no unrecognized tax benefits or related interest and penalties accrued.

The principal components of the Company's deferred tax assets (liabilities) are as follows:


	December 31,
	2016		2015
Deferred tax assets:
Net federal operating loss carry forward	$	4,748	$	4,400
Net state operating loss carry forward		599		404
Accruals		256		178
Intangibles		536		114
Stock options		1,557		—
Deferred rent		862		—
Other		182		245
Deferred tax assets		8,740		5,341
Less: valuation allowances		(7,389)		(4,489)
Deferred tax assets after valuation allowance		1,351		852
Deferred tax liabilities:
Fixed assets		(1,351)		(556)
Debt discount		—		(295)
Indefinite-lived intangibles		(832)		(335)
Deferred tax liabilities		(2,183)		(1,186)
Net deferred tax liabilities	$	(832)	$	(334)

ASC 740 requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of available evidence, it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. After consideration of all the evidence, both positive and negative, the Company has recorded a full valuation allowance against its deferred tax assets at December 31, 2016 and 2015, respectively, because the Company's management has determined that is it more-likely-than-not that these assets will not be fully realized. The Company experienced a net increase (decrease) in valuation allowance of $2,900 and $(137) for the years ended December 31, 2016 and 2015, respectively.

The changes in valuation allowance were as follows:


	Year-Ended
	December 31,
	2016		2015
Balance at beginning of the period	$	4,489	$	4,626
Increase (decrease) due to NOLs and temporary differences		2,900		(137)
Balance at end of the period	$	7,389	$	4,489

A reconciliation of income tax (expense) benefit at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:


	December 31,
	2016		2015		2014
Federal statutory rate	34.0	%	34.0	%	34.0	%
State income taxes, net of federal income tax	(1.6)		(1.4)		3.5
Change in fair value of warrant liabilities	3.8		(37.4)		(6.0)
Change in valuation allowance	(42.1)		(1.1)		7.1
Non-deductible stock compensation	(2.7)		(6.0)		(5.1)
Change in fair value of contingent consideration	—		—		(4.1)
Non-deductible expenses and other	(0.9)		(1.0)		(2.4)
Effective income tax rate	(9.5)	%	(12.9)	%	27.0	%

In the normal course of business, the Company is subject to examination by taxing authorities from the federal and state governments within the United States. As of December 31, 2016, the Company's tax years beginning in 2013 remain open for examination by taxing authorities.