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DSIT Solutions, Ltd. ('DSIT') | 12 Months Ended
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Dec. 31, 2019
Net income (loss) before income taxes for reportable segments |
DSIT Solutions, Ltd. ('DSIT') | NOTE 3—DSIT SOLUTIONS, LTD. (“DSIT”) On February 14, 2018, the Company closed on the sale of its remaining interest in DSIT to a group of Israeli investors for $5800 before transaction costs and withholding taxes. Accordingly, the Company adjusted its equity investment balance in DSIT to be equal to the gross proceeds received from the sale and recorded an impairment charge in 2017 of $308. In 2018, the Company recorded its 41.2% share of DSIT’s income or loss through the closing of the 2018 DSIT Transaction as well as the Company’s estimated transaction costs and withholding taxes on the transaction ($441 and $388, respectively) offset by $222, net of professional fees less interest income, refunded by the Israel Tax Authorities related to its 2016 Israeli tax return. From the proceeds, the Company also repaid $1,600 of amounts due to DSIT and $1,428 of loan principal and interest due to directors. The Company’s share of DSIT’s net income for the period from January 1, 2018 to the Closing Date is shown below:
|  | Period from January 1, 2018 to the Closing Date |
Revenue |  | $ | 4,481 |
Cost of sales |  |  | 2,842 |
Gross profit |  |  | 1,639 |
Net income |  | $ | 160 |
Acorn’s share of net income in DSIT |  | $ | 33 |
The activity of the Company’s Investment in DSIT for the period from January 1, 2018 to December 31, 2018 can be seen below:
|  | Equity Investment balance in DSIT |
Balance at December 31, 2017 |  |  | 5,800 |
Acorn’s share of net income in DSIT for the period from January 1, 2018 to the Closing Date |  |  | 33 |
Impairment |  |  | (33 | )
Sale of Investment in DSIT |  |  | (5,800 | )
Balance at December 31, 2018 |  | $ | — |
In the Company’s sale of its shares of DSIT Solutions Ltd. (“DSIT”), the Israel Tax Authorities (“ITA”) withheld tax of NIS 1,008, NIS 146 and NIS 1,359 in 2016, 2017 and 2018, respectively. Such amounts were recorded as expense ($266, $41 and $388) in each of those years. In August 2018, the Company received back from the ITA NIS 1,087 ($293 at the then exchange rate) consisting of $266 of tax, $21 of interest income and $6 of exchange gain. The Company received the refund following the filing of its 2016 Israeli tax return in which the Company claimed that it was due a refund of the withheld taxes in full as it believes that each of the sale transactions is exempt from tax under Israeli tax law. The Company recorded the $222, net of fees of $65 offset by interest income of $21, as part of the gain (loss) on sale of interest of DSIT in the third quarter of 2018 relating to the 2016 DSIT transaction withholding. This offsets the loss on the 2018 DSIT transaction which reduced the loss recorded in 2018 to $607. The Company committed not to transfer those funds out of Israel until the completion of the ITA’s review, such funds were deemed to be restricted and were reflected as such on the Company’s balance sheet as of December 31, 2018. By statute, the funds would no longer be restricted the earlier of December 31, 2022 or the completion of the ITA’s review of the Company’s tax position which occurred at the end of 2019 as discussed below. The Company filed its Israeli return for 2017 and requested a refund of the NIS 146 tax withheld (valued at $40 before interest) and filed its 2018 return and requested a refund of the NIS 1,358 tax withheld (valued at $375 before interest). On December 24, 2019, the Company signed on an income tax assessment agreement for tax years 2013-2018, with the Israeli Tax Authority, according to which, the Company had additional tax liability in the amount of NIS 1,306 (approximately $373), in tax year 2018, with respect to its sale of DSIT Solutions Ltd. shares. As a result, the Company received a tax refund in the amount of NIS 146 (approximately $42) and NIS 44 (approximately $12.5) as principal, with interest and linkage in the amount of approximately NIS 14.5 (approximately $4) and approximately NIS 1.9 (approximately $0.55), for the tax years 2017 and 2018, respectively. Prior to receiving this refund, the balance in the Company’s bank account in Israel was $313 which represented the $287 refund received for 2016 plus interest income of $21 and exchange gain of $5 (the fees of $65 were paid out of our US bank account). Subsequent to year-end December 31, 2019, the aggregate tax refunds held in the bank account in Israel of approximately $371 were transferred from the Company’s bank account in Israel to the Company’s bank account in the US with exemption from withholding tax and the Company’s corporate income tax file was closed as of January 1, 2020.

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