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Income Taxes

12 Months Ended

Dec. 31, 2015

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:

		2015				2014
Currently payable:
Federal		$	-			$	-
State			5,836				6,735
Total currently payable			5,836				6,735
Deferred:
Federal			(990,745	)			(13,939,671	)
State			(147,674	)			488,406
Total deferred			(1,138,419	)			(13,451,265	)
Less: increase in allowance			1,154,767				12,455,900
Net deferred			16,348				(995,365	)
Total income tax provision (benefit)		$	22,184			$	(988,630	)

Individual components of deferred taxes are as follows:

Deferred tax assets:			2015				2014
Net operating loss carry forwards		$	17,383,770			$	16,104,083
Equity issued for services			855,139				1,050,348
Goodwill and other intangibles			692,470				773,019
Investment in pass-through entity			268,476				268,476
Other			681,889				591,259
Gross deferred tax assets			19,881,744				18,787,185

Deferred tax liabilities:
Goodwill and other intangibles			291,706				312,277
Depreciation and amortization			289,534				312,823
Gross deferred tax liabilities			581,240				625,100

Less valuation allowance			(19,462,611	)			(18,307,844	)

Net deferred tax liabilities		$	(162,107	)		$	(145,759	)

During 2014, the Company recognized a $995,000 net deferred tax benefit primarily as a result of the expense recognized during the period related to the impairment of the investment in VATI and the Bascom patents.

The Company has approximately $51,958,000 in federal net operating loss carryforwards (“NOLs”) available to reduce future taxable income, which will expire at various dates from 2022 through 2034. 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 could also be subject to annual limitation as a result of a change in its equity ownership as defined under the Internal Revenue Code Section 382. This limitation, 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 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. The excess tax benefits associated with stock option exercises are recorded directly to stockholders’ equity only when realized.

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:

		2015				2014

Statutory United States federal rate			34.0	%			34.0	%
State income taxes net of federal benefit			0.7				(0.7	)
Noncontrolling interest in pass-through entity			-				(3.4	)
Permanent differences			(23.3	)			(2.3	)
Other			(3.5	)			1.1
Change in valuation reserves			(8.1	)			(26.6	)

Effective tax rate			(0.2	)%			2.1	%

At December 31, 2015 and 2014, 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, 2015 and 2014, 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 2012-2015 generally remain open to examination by major taxing jurisdictions to which the Company is subject.