XML 22 R23.htm IDEA: XBRL DOCUMENT

INCOME TAXES

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

16. INCOME TAXES

The components of loss before income taxes are summarized below:

		Year Ended December 31,
		2019				2018
Loss before income taxes
U.S. operations		$	(10,759	)		$	(10,105	)
Loss before income taxes		$	(10,759	)		$	(10,105	)

The components of the income tax provision were as follows:

		Year Ended December 31,
		2019				2018
Current
Federal		$	—			$	—
State			31				58
Deferred			1,247				(854	)
Total income tax provision		$	1,278			$	(796	)

A reconciliation from the statutory U.S. income tax rate and the Company's effective income tax rate, as computed on loss before taxes, is as follows:

		Year Ended Decmber 31,
		2019				2018
Federal Income tax at statutory rate		$	(2,259	)		$	(2,123	)
State and local income tax, net			(452	)			(424	)
Other permanent items			54				(110	)
Valuation allowance			3,859				1,568
True-up and other			76				293
Total		$	1,278			$	(796	)

The Company’s provision for income taxes reflects an effective tax rate on loss before income taxes of (11.9) % in 2019, as compared to 7.9% in 2018. The increase in the Company’s effective tax rate during 2019 primarily reflects the impact of the sale of its transformers business, the recognition of a valuation allowance and the utilization of its net operating losses.

The net deferred income tax asset was comprised of the following:

		December 31,
		2019				2018
Noncurrent deferred income taxes
Total assets		$	844			$	2,837
Total liabilities			(844	)			(1,592	)
Net noncurrent deferred income tax asset			—				1,245
Net deferred income tax asset		$	—			$	1,245

The tax effect of temporary differences between GAAP accounting and federal income tax accounting creating deferred income tax assets and liabilities were as follows:

		December 31,
		2019				2018
Deferred tax assets
U.S. net operating loss carry forward		$	—			$	662
Non-deductible reserves			1,785				1,628
Tax credits			4,631				4,631
Intangibles			2,189				1,634
Other			—				442
Valuation allowance			(7,761	)			(6,160	)
Net deferred tax assets			844				2,837
Deferred tax liabilities
Fixed assets			(64	)			(313	)
Intangibles			—				(723	)
Other			(780	)			(556	)
Net deferred tax liabilities			(844	)			(1,592	)
Deferred asset, net		$	—			$	1,245

The assessment of the amount of value assigned to our deferred tax assets under the applicable accounting rules is judgmental. We are required to consider all available positive and negative evidence in evaluating the likelihood that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and the results of recent operations. Since this evaluation requires consideration of events that may occur some years into the future, there is an element of judgment involved. Realization of our deferred tax assets is dependent on generating sufficient taxable income in future periods. We do not believe that it is more likely than not that future taxable income will be sufficient to allow us to recover any of the value assigned to our deferred tax assets. Accordingly, we have provided for a valuation allowance of the Company's foreign tax credits as we do not anticipate generating sufficient foreign source income. In addition, we have provided for a full valuation allowance on the domestic deferred tax assets as the combined effect of future domestic source income and the future reversals of future tax assets and liabilities will likely be insufficient to realize the full benefits of the assets.

As of December 31, 2019, the Company has no net operating loss carryforward. The company has approximately $4.6 million of foreign tax credits for which it has provided a full valuation allowance and $39 of research and development credits which expire in 2032.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, exclusive of interest and penalties, is as follows:

	Uncertain Tax Position
Balance as of January 1, 2018		$	218
Increases due to changes in foreign exchange			224
Balance as of December 31, 2018		$	442
Decreases related to tax returns becoming statuted barred during the year			—
Balance as of December 31, 2019		$	442

The Company’s policy is to recognize interest and penalties related to income tax matters as interest expense. Interest and penalties as they relate to the payroll tax issue are recorded as other expense.

Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. Although timing of the resolution and/or closure of audits is highly uncertain, the Company does not believe it is reasonably possible that its unrecognized tax benefits would materially change in the next twelve months.

The tax years subject to examination by major tax jurisdiction include the years 2013 and forward by the U.S. Internal Revenue Service and most state jurisdictions, and the years 2014 and forward for the Canadian jurisdiction.