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Note 7 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | Note 7 - Income Taxes For the years ended December 31, 2018 and 2017, we recognized an income tax benefit of $18,386 and $1,369, respectively.
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | - |
State |  |  | - |  |  |  | - |
Foreign |  |  | 257 |  |  |  | 300 |
|  |  | 257 |  |  |  | 300 |
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | (18,514 | ) |  |  | (1,717 | )
State |  |  | - |  |  |  | 55 |
Foreign |  |  | (129 | ) |  |  | (7 | )
|  |  | (18,643 | ) |  |  | (1,669 | )
Total income tax provision |  | $ | (18,386 | ) |  | $ | (1,369 | )
The income tax benefit for 2018 primarily represents a non-cash benefit of $18,652 upon recognizing the release of the valuation allowance on our U.S. deferred tax assets as of December 31, 2018. The income tax benefit for 2017 primarily represents a one -time, non-cash benefit of $1,939 for the revaluation of deferred tax liabilities on goodwill and certain other intangible assets upon the enactment of the Tax Cuts and Jobs Act (the “Tax Act”). As of December 31, 2018, the Company recognized the release of the valuation allowance on our net operating loss carryforwards and other U.S. deferred tax assets on the basis of management’s assessment. In evaluating the realizability of our U.S. deferred tax assets, management considered all available evidence and concluded that positive factors, including further demonstration of sustained profitability in our core business and continued improvement in our ability to achieve internal earnings forecasts, outweighed all negative factors, including our history of operating losses (prior to 2015 ) and historical operating volatility in our core business. Our assessment also considered our expectation to utilize our domestic net operating loss carryforwards of $63,388, which expire 2019 thru 2035, and our general business tax credits of $1,817, which expire 2028 thru 2037. Based on the results of our assessment, management concluded that it is more likely than not that our U.S. deferred tax assets will be fully realized. As of December 31, 2018 and 2017, for certain past operations in the U.K., we continue to report a valuation allowance for net operating loss carryforwards of approximately $10,220, nearly all of which can be carried forward indefinitely. Management has concluded that the realizability of the U.K. net operating loss carryforwards is not more likely than not, as utilization of the net operating losses may be limited due to the change in the past U.K. operation. These net operating losses in the U.K. cannot currently be used to reduce taxable income at our other U.K. subsidiary, Accutronics Ltd. There are no other deferred tax assets related to the past U.K. operations. As of December 31, 2018 and 2017, we have not recognized a valuation allowance against our other foreign deferred tax assets, as we believe that it is more likely than not that they will be realized. We will continue to evaluate the realizability of our deferred tax assets in future periods. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |
Deferred Tax Assets: |  |  |  |  |  |  |  |
Property, Plant and Equipment |  | $ | 168 |  |  | $ | 44 |
Net Operating Loss Carryforwards |  |  | 15,622 |  |  |  | 16,838 |
Tax Credit Carryforwards |  |  | 1,817 |  |  |  | 1,837 |
Intangible Assets |  |  | 1,231 |  |  |  | 1,535 |
Accrued Expenses, Reserves and Other |  |  | 1,838 |  |  |  | 1,359 |
Total Deferred Tax Assets |  |  | 20,676 |  |  |  | 21,613 |
Valuation Allowance for Deferred Tax Assets |  |  | (1,942 | ) |  |  | (21,604 | )
Net Deferred Tax Assets |  |  | 18,734 |  |  |  | 9 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Other |  |  | (25 | ) |  |  | (38 | )
Intangible Assets |  |  | (3,856 | ) |  |  | (3,806 | )
Total Deferred Tax Liabilities |  |  | (3,881 | ) |  |  | (3,844 | )
Net Deferred Tax Assets (Liabilities) |  | $ | 14,853 |  |  | $ | (3,835 | )
Net deferred tax assets (liabilities) are comprised of the following balance sheet amounts:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |
Deferred Tax Assets |  | $ | 15,444 |  |  | $ | 32 |
Deferred Tax Liabilities |  |  | (591 | ) |  |  | (3,867 | )
|  | $ | 14,853 |  |  | $ | (3,835 | )
For the year ended December 31, 2018, the valuation allowance for deferred tax assets decreased by $19,662 primarily due to the realization of the U.S. deferred tax assets as of December 31, 2018. For the year ended December 31, 2017, the valuation allowance decreased by $10,695 due to the reduction of U.S. deferred tax assets due to the Company’s pretax income as well as the revaluation of the deferred taxes due to the enactment of the Tax Cuts and Jobs Act. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act. The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to ( 1 ) reducing the U.S. federal corporate tax rate from 35 percent to 21 percent; ( 2 ) elimination of the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; ( 3 ) changing rules related to usage and limitation of net operating loss carryforwards created in tax years beginning after December 31, 2017; ( 4 ) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries for tax years beginning after December 31, 2017; and ( 5 ) implementing a territorial tax system and imposing a transition toll tax on deemed repatriated earnings of foreign subsidiaries. The Act reduced the U.S. corporate tax rate to 21 percent, effective January 1, 2018. Deferred tax assets and liabilities were revalued from 35 percent to 21 percent upon enactment of the Tax Act. The Act provided for a one -time deemed mandatory repatriation for post- 1986 undistributed foreign subsidiary earnings and profits (“E&P”) through the year ended December 31, 2017. The Company had a deficit in foreign E&P and was not expected to be subject to the deemed mandatory repatriation. On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company had recognized the provisional tax effects related to the revaluation of deferred tax assets and liabilities for the year ended December 31, 2017. As of December 31, 2017, we had completed the majority of our accounting for the effects of the Tax Act. As of December 31, 2018, we have completed our evaluation of the effects of the Tax Act and concluded that no revisions are necessary. Effective January 1, 2017, the Company adopted ASU 2016 - 09, Compensation - Stock Compensation (Topic 718 ): Improvement to Employee Share-Based Payment Accounting. Upon adoption, the Company recognized a gross deferred tax asset of $1,123 and a corresponding valuation allowance in the same amount resulting in no net deferred tax asset recognition. As of December 31, 2018, the Company has realized the benefit of this deferred tax asset upon release of the U.S. valuation allowance. At December 31, 2018, the Company maintains its assertion that all foreign earnings will be indefinitely reinvested in those operations. For financial reporting purposes, income from continuing operations before income taxes is as follows:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |
United States |  | $ | 6,226 |  |  | $ | 4,831 |
Foreign |  |  | 387 |  |  |  | 1,464 |
|  | $ | 6,613 |  |  | $ | 6,295 |
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to income from continuing operations before income taxes as follows:
|  | Years Ended December 31, |
|  | 2018 |  |  | 2017 |
Statutory Income Tax Rate |  |  | 21 | % |  |  | 34 | %
(Increase) Decrease in Tax Provision Resulting From: |  |  |  |  |  |  |  |
Equity Compensation |  |  | (2.9 | ) |  |  | 0.7 |
Income Tax Credits |  |  | (1.0 | ) |  |  | (0.9 | )
Foreign Tax Rates |  |  | 0.3 |  |  |  | (3.8 | )
Valuation Allowance |  |  | (297.3 | ) |  |  | (20.9 | )
Tax Rate Change |  |  | - |  |  |  | (30.8 | )
Other |  |  | 2.0 |  |  |  | (0.1 | )
Effective Income Tax Rate |  |  | (277.9 | )% |  |  | (21.8 | )%
Accounting for Uncertainty in Income Taxes There were no unrecognized tax benefits related to uncertain tax positions at December 31, 2018 and 2017. As a result of our operations, we file income tax returns in various jurisdictions including U.S. federal, U.S. state and foreign jurisdictions. We are routinely subject to examination by taxing authorities in these various jurisdictions. Our U.S. tax matters for the years 2000 through 2018 remain subject to examination by the Internal Revenue Service (“IRS”) due to our net operating loss carryforwards. Our U.S. tax matters for the years 2000 through 2018 remain subject to examination by various state and local tax jurisdictions due to our net operating loss carryforwards. Our tax matters for the years 2010 through 2018 remain subject to examination by the respective foreign tax jurisdiction authorities.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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