XML 24 R10.htm IDEA: XBRL DOCUMENT
v3.8.0.1

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2017
INCOME TAXES |
INCOME TAXES | NOTE 4. INCOME TAXES The income tax expense for the years ended December 31, 2017 and 2016 consists of the following:
|  | 2017 |  | 2016 |
Current taxes - Federal |  | $ | (124,000 | ) | $ | 240,000 |
Current taxes - State |  | 10,000 |  | 10,000 |
Current taxes - Foreign |  | 49,000 |  | (13,000 | )
Deferred taxes - Federal |  | 176,000 |  | (167,000 | )
Deferred taxes - State |  | 239,000 |  | 10,000 |
Deferred taxes - Foreign |  | 25,000 |  | (45,000 | )
Income tax expense |  | $ | 375,000 |  | $ | 35,000 |
The statutory rate reconciliation for the years ended December 31, 2017 and 2016 is as follows:
|  | 2017 |  | 2016 |
Statutory federal tax provision (benefit) |  | $ | (704,000 | ) | $ | 27,000 |
State income tax benefit |  | (117,000 | ) | (32,000 | )
Effect of foreign operations |  | (88,000 | ) | 107,000 |
Uncertain tax positions |  | — |  | 2,000 |
Income tax credits |  | (112,000 | ) | (134,000 | )
Valuation allowance |  | 1,011,000 |  | 49,000 |
Permanent differences |  | 8,000 |  | 16,000 |
Loss of Section 199 due to carryback claim |  | 46,000 |  | — |
Effects of tax reform |  | 280,000 |  | — |
Other |  | 51,000 |  | — |
Income tax expense |  | $ | 375,000 |  | $ | 35,000 |
Income (loss) from operations before income taxes was derived from the following sources:
|  | 2017 |  | 2016 |
Domestic |  | $ | (2,831,433 | ) | $ | 486,425 |
Foreign |  | 760,658 |  | (407,651 | )
Total |  | $ | (2,070,775 | ) | $ | 78,774 |
Deferred tax assets (liabilities) at December 31, 2017 and 2016, consist of the following:
|  | 2017 |  | 2016 |
Deferred Tax |  |  |  |  |
Allowance for uncollectable accounts |  | $ | 49,000 |  | $ | 317,000 |
Inventories reserve |  | 198,000 |  | 242,000 |
Accrued vacation |  | 194,000 |  | 362,000 |
Amortization |  | 191,000 |  | 56,000 |
Stock-based compensation and equity appreciation rights |  | 23,000 |  | 29,000 |
Net operating loss carryforwards |  | 359,000 |  | 134,000 |
Tax credit carryforwards |  | 613,000 |  | 242,000 |
Other |  | 23,720 |  | 188,000 |
|  | 1,650,720 |  | 1,570,000 |
Valuation allowance |  | (1,146,000 | ) | (135,000 | )
Deferred tax assets |  | 504,720 |  | 1,435,000 |
Prepaid expenses |  | (165,000 | ) | (323,000 | )
Property and equipment |  | (319,000 | ) | (569,000 | )
Deferred tax liabilities |  | (484,000 | ) | (892,000 | )
Net deferred tax assets |  | $ | 20,720 |  | $ | 543,000 |
We currently have significant deferred tax assets as a result of temporary differences between taxable income on our tax returns and U.S. GAAP income, research and development tax credit carry forwards and federal and state net operating loss carry forwards. A deferred tax asset generally represents future tax benefits to be received when temporary differences previously reported in our financial statements become deductible for income tax purposes, or when net operating loss carry forwards are applied against future taxable income, or when tax credit carry forwards are utilized on our tax returns. We assess the realizability of our deferred tax assets and the need for a valuation allowance based on the guidance provided in current financial accounting standards. Significant judgment is required in determining the realizability of our deferred tax assets. The assessment of whether valuation allowances are required considers, among other matters, the nature, frequency and severity of any current and cumulative losses, forecasts of future profitability, the duration of statutory carry forward periods, our experience with loss carry forwards not expiring unused and tax planning alternatives. We have concluded that a valuation allowance is needed for all of our United States based deferred tax assets due to the cumulative net losses we have sustained in the past three years and our near term financial outlook. In analyzing the need for a valuation allowance, we considered our history of operating results for income tax purposes over the past three years in each of the tax jurisdictions where we operate, statutory carry forward periods and tax planning alternatives. Finally, we considered both our near and long-term financial outlook and timing regarding when we might return to profitability. After considering all available evidence both positive and negative, we concluded that the valuation allowance is needed for all of our U.S. based deferred tax assets, no valuation allowance was placed on the foreign assets. At December 31, 2017, we had federal general business tax credit carryforwards of $404,000 that will begin to expire in 2028 and a federal net operating loss (“NOL”) carry forward of $948,000 that will expire begin to expire in 2037, if unused. For U.S. state tax purposes we have Minnesota R&D credit carryforwards of $330,000 and various state net operating loss carryforwards of $357,000 for Iowa, $21,000 for Montana, $1,144,000 for Minnesota, $669,000 for Wisconsin. The state credits and NOLs expire at various years starting in 2024. The tax effects from an uncertain tax positions can be recognized in our consolidated financial statements, only if the position is more likely than not to be sustained on audit, based on the technical merits of the position. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The following table sets forth changes in our total gross unrecognized tax benefit liabilities, excluding accrued interest, for the years ended December 31, 2017 and 2016:
Balance as of December 31, 2015 |  | $ | 51,000 |
Tax positions related to 2016: |  |  |
Additions based on tax positions related to the current year |  | 15,000 |
Additions based on tax positions related to the prior year |  | 5,000 |
Reductions based on tax positions related to a prior year |  | (6,000 | )
Statute of limitations |  | (13,000 | )
Balance as of December 31, 2016 |  | $ | 52,000 |
Tax positions related to current year: |  |  |
Additions based on tax positions related to the current year |  | 22,000 |
Statute of limitations |  | (22,000 | )
Balance as of December 31, 2017 |  | $ | 52,000 |
The $52,000 of unrecognized tax benefits as of December 31, 2017 includes amounts which, if ultimately recognized, will reduce our annual effective tax rate. In prior years, it was included in other long-term liabilities on the accompanying consolidated balance sheets. In 2017, the amount has been netted against the applicable deferred tax asset as any adjustment would reduce the recorded asset. Our policy is to accrue interest related to potential underpayment of income taxes within the provision for income taxes. The liability for accrued interest as of December 31, 2017 and 2016 was not significant. Interest is computed on the difference between our uncertain tax benefit positions and the amount deducted or expected to be deducted in our tax returns. We are subject to income taxes in the U.S. federal jurisdiction and various state jurisdictions. The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2017, with few exceptions, the Company or its subsidiaries are no longer subject to examination prior to tax year 2011. On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 34% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017. The Company has calculated an estimate of the impact of the Tax Act in its year-end income tax provision in accordance with its understanding of the Tax Act and guidance available as of the date of this filing and as a result has recorded approximately $280,000 as additional income tax expense in the fourth fiscal quarter of 2017, the period in which the legislation was enacted. The provisional amount related to the re-measurement of certain deferred tax assets and liabilities, based on the rates at which they are expected to reverse in the future, was approximately $223,000. The provisional amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings was approximately $57,000. The SEC recently issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on the application of US 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. In accordance with SAB 118, the Company has determined that the $57,000 of deferred tax expense recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings was a provisional amount and a reasonable estimate at December 31, 2017. As further guidance is issued by Treasury, additional work may be necessary to ensure earnings as required by the calculations are properly determined. Additionally, as a result of the Tax Act, the Company has not completed its evaluation of its indefinite reinvestment assertion with regard to foreign earnings under ASC 740-30-25-17 [formerly known as APB 23]. As a result, deferred tax liabilities may be increased or decreased during the period allowed under SAB 118. Lastly, the Company is required to recognize 8% of the transition tax into current tax, however the Company has not recorded this amount and believes this amount would be immaterial and offset by tax credits available.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- 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://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration