Annual report pursuant to Section 13 and 15(d)

Note 13 - Income Taxes

Note 13 - Income Taxes

12 Months Ended

Dec. 31, 2016

NOTE

INCOME TAXES

The components of current and deferred federal and state income tax (benefit) expense for continuing operations for the years ended

December

31,

consisted of the following (in thousands):

	2016			2015
Federal income tax expense - current	$	9		$	116
Federal income tax (benefit) expense - deferred		(2,657	)		142
State income tax expense - current		59			9
State income tax (benefit) expense - deferred		(405	)		276
Total income tax (benefit) expense	$	(2,994	)	$	543

We had temporary differences and net operating loss carry forwards from both our continuing and discontinued operations, which gave rise to deferred tax assets and liabilities at

December

31,

2016

and

2015

as follows (in thousands):

	2016			2015
Deferred tax assets:
Net operating losses	$	7,288		$	4,566
Environmental and closure reserves		3,189			2,497
Other		2,285			2,800
Deferred tax liabilities:
Depreciation and amortization		(162	)		(1,130	)
Goodwill and indefinite lived intangible assets		(2,362	)		(5,443	)
Prepaid expenses		(72	)		(122	)
		10,166			3,168
Valuation allowance		(12,528	)		(8,592	)
Net deferred income tax liabilities		(2,362	)		(5,424	)

An overall reconciliation between the expected tax (benefit) expense using the federal statutory rate of

34%

and the (benefit) expense for income taxes from continuing operations as reported in the accompanying Consolidated Statement of Operations is provided below (in thousands).

	2016			2015
Tax (benefit) expense at statutory rate	$	(5,527	)	$	166
State tax benefit, net of federal benefit		(785	)		(93	)
Change in deferred tax rates		(82	)		208
Permanent items		119			84
Difference in foreign rate		98			40
Change in deferred tax liabilities		(260	)		206
Other		(241	)		(124	)
Increase in valuation allowance		3,684			56
Income tax (benefit) expense	$	(2,994	)	$	543

The provision for income taxes is determined in accordance with ASC

740,

“Income Taxes.” Deferred income tax assets and liabilities are recognized for future tax consequences attributed to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred income tax assets and liabilities are measured using enacted income tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Any effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The Company regularly assesses the likelihood that the deferred tax asset will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred income taxes to an amount that is more likely than not to be realized. In

2016

and

2015,

we determined that it was more likely than not that approximately

$12,528,000

and

$8,592,000,

respectively, of deferred income tax assets would not be realized, and as such, a full valuation allowance was applied against those deferred income tax assets. Our valuation allowance increased by

$3,684,000

and

$56,000

for the years ended

December

31,

2016

and

2015,

respectively.

We have estimated net operating loss carryforwards (“NOLs”) for federal and state income tax purposes of approximately

$10,372,000

and

$65,658,000,

respectively, as of

December

31,

2016.

The estimated consoliated federal and state NOLs include approximately

$3,259,000

and

$4,179,000,

respectively, of our majority-owned subsidiary, PF Medical, which is not part of our consolidated group for tax purposes. These net operating losses can be carried forward and applied against future taxable income, if any, and expire in various amounts starting in

2021.

However, as a result of various stock offerings and certain acquisitions, which in the aggregate constitute a change in control, the use of these NOLs will be limited under the provisions of Section

382

of the Internal Revenue Code of

1986,

as amended. Additionally, NOLs

may

be further limited under the provisions of Treasury Regulation

1.1502

regarding Separate Return Limitation Years.

The tax years

2013

through

2015

remain open to examination by taxing authorities in the jurisdictions in which the Company operates.

No uncertain tax positions were identified by the Company for the years currently open under statute of limitations, including

2015

and

2016.

As of

December

31,

2016

and

2015,

the Company had approximately

and

$32,000

of federal income tax payable, respectively.