INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

The Company accounts for income taxes in accordance with ASC 740 which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure and transition. There were no unrecognized tax benefits as of December 31, 2016 and 2015.

The Company has identified its federal tax return and its state tax return in Florida as “major” tax jurisdictions, as defined in ASC 740, Income Taxes. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Company’s financial statements. The Company’s evaluation was performed for tax years ended 2013 through 2016, the only periods subject to examination. The Company believes that its income tax positions and deductions will be sustained upon audit and does not anticipate any adjustments that will result in a material change to its financial position. The Company has elected to classify interest and penalties incurred on income taxes, if any, as income tax expense. No interest or penalties on income taxes have been recorded during the years ended December 31, 2016 and 2015. The Company does not expect its unrecognized tax benefit position to change during the next twelve months. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.

The following table summarizes components of the provision for (benefit from) current and deferred income taxes for the years ended December 31, 2016 and 2015:

	2016		2015
	(in thousands)
Current
Federal	$	0	$	0
State and other		1		25
Total Current		1		25
Deferred
Federal		827		(2	)
State and other		88		(0	)
Total Deferred		915		(2	)
Provision for Income Taxes	$	916	$	23

The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company’s effective tax rate for financial statement purposes for the years ended December 31, 2016 and 2015:

	2016			2015
U.S. Federal Statutory Tax Rate		34.0	%		34.0	%
Permanent items		(19.0	)%		2.0	%
State taxes		2.0	%		4.0	%
Expiration of capital loss carryforward		(93.0	)%		(0.0	)%
Impact of change in state tax laws on net operating losses		(165.0	)%		—
Change in valuation allowance		76.0	%		(36.0	)%
Totals		(165.0	)%		4.0	%

The tax effects of temporary differences that give rise to deferred tax assets and liabilities as of December 31, 2016 and 2015 are summarized as follows:

	2016			2015
	(in thousands)
Deferred Tax Assets
Net operating loss carryforwards	$	8,622		$	9,410
Tax credit carryforwards		347			347
Fixed and intangible assets		(182	)		(92	)
Charitable contributions		1			—
Value of stock options and stock compensation		501			453
Deferred rent		10			14
Capital loss carryforward		—			517
Accruals		153			142
		9,452			10,791
Valuation Allowance		(9,172	)		(9,596	)
Deferred Tax Assets, Net	$	280		$	1,195

The change in the valuation allowance for deferred tax assets for the years ended December 31, 2016 and 2015 are summarized as follows:

	2016			2015
	(in thousands)
Beginning Balance	$	9,596		$	9,824
Change in Allowance		(424	)		(228	)
Ending Balance	$	9,172		$	9,596

As of December 31, 2016, the Company has federal and state net operating loss carryforward (“NOLs”) remaining of approximately $25 million and $329,000, respectively, which may be available to reduce taxable income, if any. Due to changes in certain state tax laws, the previous state NOL of $20 million may no longer be utilized by the Company. None of the federal NOLs expired in 2016 or 2015. The remaining federal net operating loss carryforwards expire from 2019 through 2036. However, Internal Revenue Code Section 382 rules limit the utilization of NOLs upon an ownership change of a company. During 2016, the Company performed an evaluation as to whether an ownership change had taken place. Management believes that there has been no ownership change as such applies to Section 382. However, if it is determined that an ownership change has taken place, either historically or in the future, utilization of its NOLs will be subject to limitations, which could eliminate a substantial portion of the future income tax benefits of the NOLs. The NOL carryforward as of December 31, 2016 included approximately $1,193,000 related to windfall tax benefits for which a benefit would be recorded in additional paid-in capital if and when realized.

During 2016, the Company reviewed previous positive and negative evidence and also reviewed its expected taxable income for future periods and concluded it is more likely than not that approximately $280,000 of tax benefits relating to NOLs will be utilized.