Note 9 - Income Taxes

The components of income tax expense (benefit) are as follows:

(in thousands)	Year Ended December 31, 2016			Year Ended December 31, 2015
Federal - current	$	-		$	-
State - current		(142	)		140
Total current		(142	)		140
Federal - deferred		(1,752	)		(1,365	)
State - deferred		(105	)		(205	)
Change in valuation allowance		1,857			1,570
Total deferred		-			-
Income tax expense (benefit)	$	(142	)	$	140

The components of pretax income (loss) and the difference between income taxes computed at the statutory federal rate and the provision for income taxes are as follows:

(in thousands)	Year Ended December 31, 2016			Year Ended December 31, 2015

Income (loss) before income taxes	$	(3,361	)	$	(4,485	)
Tax expense (benefit) :
Tax at statutory federal rate	$	(1,176	)	$	(1,570	)
State income taxes		(142	)		140
Permanent items		–			–
Other		(681	)		-
Change in valuation allowance		1,857			1,570
Income tax expense (benefit)	$	(142	)	$	140

A reconciliation of the United States federal statutory rate to the Company's effective income tax rate is as follows:

	Year Ended December 31, 2016		Year Ended December 31, 2015
Tax at statutory federal rate	35.0	%	35.0	%
State income taxes	4.2		(3.1)
Permanent difference, tax credits and other adjustments	-		-
Other	20.3		-
Change in valuation allowance	(55.3)		(35.0)
Effective income tax rate	4.2	%	(3.1)	%

For the year ended December 31, 2016, other includes amounts relating to deferred tax true-ups. The Company has not been notified of any potential tax audits by any federal, state or local tax authorities. The Company believes the statutes of limitations for the assessment of additional federal and state tax liabilities are generally closed for tax years prior to 2013. Interest and/or penalties related to underpayments of income taxes, or on uncertain tax positions, if applicable, would be included as a component of income tax expense (benefit). The accompanying financial statements do not include any amounts for penalties.

State income tax amounts for the year ended December 31, 2016, reflect a net benefit related to current year and prior year state tax true-ups. State income tax amounts for the year ended December 31, 2015, reflect a provision for a tax on capital imposed by the state jurisdictions.

The utilization of certain carryforwards and carrybacks is subject to limitations under U.S. federal income tax laws. Based on the Company's federal tax returns as filed and to be filed, the Company estimates it has federal NOL carryforwards and federal alternative minimum tax credit carryforwards ("AMT Credits") available to reduce future federal taxable income which would expire if unused, as indicated below.

The federal NOL carryforwards as of December 31, 2016 are as follows:

Tax Year Originating	Tax Year Expiring	Amount

2006	2026	$	500,000
2007	2027		12,700,000
2008	2028		4,600,000
2009	2029		2,400,000
2010	2030		1,900,000
2011	2031		1,900,000
2013	2033		3,700,000
2014	2034		4,900,000
2015	2035		4,200,000
2016	2036		2,600,000
		$	39,400,000

AMT credits available, which are not subject to expiration, are as follows:

		Amount
AMT Credits		$	21,000,000

Based on the Company's state tax returns as filed and to be filed, the Company estimates that it has state NOL carryforwards to reduce future state taxable income, which would expire if unused.

The state NOL carryforwards as of December 31, 2016 are as follows:

Tax Year Originating	Tax Year Expiring	Amount

2011	2031	$	1,800,000
2013	2033		2,700,000
2014	2034		4,200,000
2015	2035		4,100,000
2016	2036		2,800,000
		$	15,600,000

The Company has a deferred tax asset arising primarily from NOL carryforwards and AMT credits as follows:

	December 31, 2016			December 31, 2015
Net deferred tax asset	$	36,400,000		$	34,500,000
Valuation allowance		(36,400,000	)		(34,500,000	)
Net deferred tax asset recognized	$	-		$	-

A valuation allowance has been established for the entire deferred tax asset, as management has no basis to conclude that realization is more likely than not. Management does not believe that any significant changes in unrecognized income tax benefits are expected to occur over the next year.