11.

Income Taxes

The income tax provisions are comprised of the following:

	Dec. 31 2018			Dec. 31 2017
Current:
Federal	$	165,000		$	(188,549	)
State		-			(11,964	)
Foreign		(245,040	)		317,823
	$	(80,040	)	$	117,310

Deferred
Federal	$	317,640		$	732,895
State		266,413			(79,598	)
Foreign		432,693			(59,074	)
		1,016,746			594,223
Total Income Tax Provision	$	936,706		$	711,533

The

2017

tax provision included the impact of changes in deferred taxes of

$0.2

million resulting from the federal rate change from

34%

21%.

The components of the net deferred tax asset at

December 31

are as follows:

	2018			2017
Deferred tax assets:
Federal and state net operating loss carryforwards	$	805,865		$	523,808
Foreign tax credit and other credits		469,408			592,993
Reserves and accruals		320,783			271,884
Unicap 263A adjustment		112,199			126,944
Other deferred tax assets		88,369			26,198
Foreign and VIE net operating loss carryforwards		566,765			569,147
Deferred Interest Expense		529,983			-
Total gross deferred tax assets		2,893,372			2,110,974

Deferred tax liabilities:
Fixed assets and intangibles		(257,113	)		(273,746	)
Deferred state income tax		(91,691	)		(103,055	)
Total gross deferred tax liabilities		(348,804	)		(376,801	)
Less: valuation allowance		(2,409,474	)		(631,706	)
Net deferred tax assets		135,094			1,102,467

Deferred Tax Asset Valuation Allowance
Beginning Balance		631,706			45,000
Additions charged (credited) to expense		1,777,768			586,706
Balance at end of year		2,409,474			631,706

The Company has a net operating loss carryforward for federal income tax purposes of approximately

$1.0

million which will begin to expire in

2024,

as well as federal tax credits of approximately

$0.5

million after

$0.1

million expired during

2018.

It also has a net operating loss carryforward for state income tax purposes of approximately

$6.3

million, which will begin to expire in

2022.

December 22, 2017,

the U.S. government enacted significant tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act created a separate category of creditable foreign source income related to foreign branches. This

may

operate to prevent cross-crediting of foreign tax credit carryforwards generated by the Company in prior years with those attributable to branch income generated in future years. As a result of this new provision, the U.S. Foreign Tax Credit deferred tax asset has been fully offset by a valuation allowance recorded during

2017.

Because we are out of compliance with the terms of our credit facility, are operating under a forbearance agreement, and substantial doubt exists regarding our ability to continue as a going concern, we have increased the valuation allowance to include substantially all of our tax carryforward assets, or

$1.8

million during the year ended

December 31, 2018.

It increased by

$0.6

million during the year ended

December 31, 2017

as noted above.

Income tax provisions differed from the taxes calculated at the statutory federal tax rate as follows:

	Years Ended December 31,
	2018			2017
Federal Taxes at statutory rate	$	(589,875	)	$	(372,364	)
State income taxes, net of Federal tax effect		(298.917	)		(60,695	)
Nondeductible expenses		3,859			35,083
Foreign taxes		45,552			522,803
Change in valuation allowance		1,777,768			586,706
Other		(1,681	)		-
Income tax provision	$	936,706		$	711,533

The Company files tax returns in the U.S., and in the U.K, Germany and Mexico foreign tax jurisdictions and also in various state jurisdictions in the U.S. The tax years

2015

through

2017

remain open to examination. The Company’s policy is to recognize interest and penalties related to uncertain tax positions in income tax expense. As of

December 31, 2018

and

2017,

the Company does

not

believe it has any uncertain tax positions.

Tax Reform act of

2017

December 22, 2017,

the SEC issued Staff Accounting Bulletin

No.

118

(SAB

118

) which addresses income tax accounting implications of the Tax Act. The purpose of SAB

118

was to address any uncertainty or diversity of view in applying ASC Topic

740,

Income Taxes in the reporting period in which the Tax Act was enacted. SAB

118

addresses situations where the accounting is incomplete for certain income tax effects of the Tax Act upon issuance of a company’s financial statements for the reporting period which includes the enactment date. SAB

118

allows for a provisional amount to be recorded if it is a reasonable estimate of the impact of the Tax Act. Additionally, SAB

118

allows for a measurement period to finalize the impacts of the Tax Act,

not

to extend beyond

one

year form the date of enactment. Estimates were used in determining the balances of deferred tax assets and liabilities subject to changes in tax laws included in the Tax Act.