Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 9 - INCOME TAXES

Following is a summary of the components giving rise to the income tax provision (benefit) for the years ended December 31:

The provision (benefit) for income taxes consists of the following:
	2016			2015
Currently payable:
Federal	$	132,835		$	-
State		(5,617	)		5,836
Total currently payable		127,218			5,836
Deferred:
Federal		(379,710	)		(990,745	)
State		(111,642	)		(147,674	)
Total deferred		(491,352	)		(1,138,419	)
Less: increase in allowance		374,864			1,154,767
Net deferred		(116,488	)		16,348
Total income tax provision	$	10,730		$	22,184

Individual components of deferred taxes are as follows:

		2016			2015
Deferred tax assets:
Net operating loss carry forwards	$	15,302,177		$	17,383,770
Equity issued for services		280,975			855,139
Goodwill and other intangibles		1,684,346			692,470
Investment in pass-through entity		17,898			268,476
Deferred revenue		1,522,258			-
Other		849,325			681,889
Gross deferred tax assets		19,656,979			19,881,744
Deferred tax liabilities:
Goodwill and other intangibles		277,231			291,706
Depreciation and amortization		272,406			289,534
Gross deferred tax liabilities		549,637			581,240
Less: valuation allowance		(19,152,961	)		(19,462,611	)
Net deferred tax liabilities	$	(45,619	)	$	(162,107	)

The Company has approximately $46,038,000 in federal net operating loss carryforwards (“NOLs”) available to reduce future taxable income, which will expire at various dates from 2022 through 2036. Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in the future and utilize the NOLs before they expire, the Company has recorded a valuation allowance accordingly. The Company’s NOLs are subject to annual limitations as a result of a change in its equity ownership as defined under the Internal Revenue Code Section 382. These limitations, as applicable, could further limit the use of the NOLs.

The excess tax benefits associated with stock option exercises are recorded directly to stockholders’ equity only when realized. As a result, the excess pre-tax benefits available in net operating loss carryforwards but not reflected in deferred tax assets was approximately $1,019,000. These carryforwards expire at various dates from 2022 through 2030.

Stock options granted by the Company in prior years as compensation for services were forfeited. This resulted in the reversal of approximately $678,000 of deferred tax assets and a corresponding reduction of the valuation allowance.

The differences between the United States statutory federal income tax rate and the effective income tax rate in the accompanying consolidated statements of operations are as follows:

	2016			2015
Statutory United States federal rate		34.0	%		34.0	%
State income taxes net of federal benefit		5.0			0.7
Permanent differences		(3.9	)		(23.3	)
Other		(0.4	)		(3.5	)
Change in valuation reserves		(35.8	)		(8.1	)
Effective tax rate		(1.1	)%		(0.2	)%

At December 31, 2016 and 2015, the total unrecognized tax benefits of $446,000 have been netted against the related deferred tax assets.

The Company recognizes interest accrued and penalties related to unrecognized tax benefits in tax expense. During the years ended December 31, 2016 and 2015, the Company recognized no interest and penalties.

The Company files income tax returns in the U.S. federal jurisdiction and various states. The tax years 2013-2016 generally remain open to examination by major taxing jurisdictions to which the Company is subject.