Income Taxes

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

Income Taxes

Note 12. Income Taxes

The income tax provision consists of the following ($ in thousands):

dollars in thousands
	As of December 31,
	2016			2015
Federal
Current	$	-		$	-
Deferred		3,578			16,374
Increase in valuation allowance		3,578			(16,374	)
State and local
Current		-			-
Deferred		(50	)		837
Increase in valuation allowance		50			(837	)
Change in Valuation Allowance		(3,578	)		(17,211	)
Income Tax Provision (Benefit)	$	-			-

The following is a reconciliation of the U.S. federal statutory rate to the effective income tax rates for the years ended December 31, 2016 and 2015:

	For the years ended December 31,
	2016			2015
U.S. Statutory Federal Rate		34.00	%		34.00	%
State Taxes, Net of Federal Tax Benefit		2.97	%		2.52	%
Other Permanent Differencee		1.01	%		0.01	%
State rate change effect		6.88	%		-0.75	%
Fair Value of Warrants		11.85	%		0.00	%
Increase due to change in NOL and other true ups		(1.47	)%		-2.35	%
Change in Valuation Allowance		-55.25	%		-33.43	%
Income Taxes Provision (Benefit)		0.0			0.0

At December 31, 2016 and 2015, the Company’s deferred tax assets and liabilities consisted of the effects of temporary differences attributable to the following ($ in thousands):

dollars in thousands
	As of December 31,
	2016			2015
Deferred tax assets:
Net-operating loss carryforward	$	12,971		$	10,290
Stock based compensation		8,413			8,101
Patent portfolio and other		17,796			17,211
Total Deferred Tax Assets		39,180			35,602
Valuation allowance		(39,180	)		(35,602	)
Deferred Tax Asset, Net of Allowance	$	-		$	-

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. The Company has determined that, based on objective evidence currently available, it is more likely than not that the deferred tax assets will not be realized in future periods. Accordingly, the Company has provided a valuation allowance for the full amount of the deferred tax assets at December 31, 2016 and 2015. As of December 31, 2016, the change in valuation allowance is approximately $6.0 million.

As of December 31, 2016, the Company had federal and state net operating loss carryovers (“NOLs”) of approximately $37.5 million, which expire from 2029 through 2036. The NOL carryover may be subject to limitation under Internal Revenue Code section 382, should there be a greater than 50% ownership change as determined under the regulations. The Company’s net operating loss includes approximately $3.0 million of previously unidentified loss benefits, net of limitations under section 382 of the Internal Revenue Code and similar state provisions. The deferred tax asset balance at December 31, 2015 and related valuation allowance has been revised to include the amount of the benefit. The Company has determined that the amount of the revision is insignificant to the Company’s previously reported financial position and results of operations. The effect of any subsequent ownership change may lower annual limitation and further decrease available NOL carryover utilization.

As required by the provisions of ASC 740, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of NOL or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740.

If applicable, interest costs and penalties related to unrecognized tax benefits are required to be calculated and would be classified as interest and penalties in general and administrative expense in the statement of operations. As of December 31, 2016 and 2015, no liability for unrecognized tax benefit was required to be reported. No interest or penalties were recorded during the years ended December 31, 2016 and 2015. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. The Company files U.S. federal and state income tax returns. As of December 31, 2016, the Company’s U.S. and state tax returns (California, Delaware, Maryland, New York, New York City Pennsylvania and Texas) remain subject to examination by tax authorities beginning with the tax return filed for the year ended December 31, 2013. At this time, the Company's 2013 federal tax return has been selected for examination by the Internal Revenue Service. The Company believes that its income tax positions would be sustained upon an audit and does not anticipate any adjustments that would result in material changes to its consolidated financial position.