Note

- 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

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.

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 (

) reducing the U.S. federal corporate tax rate from

percent to

percent; (

) elimination of the corporate alternative minimum tax (AMT) and changing how existing AMT credits can be realized; (

) changing rules related to usage and limitation of net operating loss carryforwards created in tax years beginning after

December 31, 2017; (

) generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries for tax years beginning after

December 31, 2017;

and (

) 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

percent, effective

January 1, 2018.

Deferred tax assets and liabilities were revalued from

percent to

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.

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

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

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.

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

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.