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Note 12 - Income Taxes | 12 Months Ended
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Dec. 31, 2018
Notes to Financial Statements |
Income Tax Disclosure [Text Block] | 12. Income Taxes Consolidated income before taxes for domestic and foreign operations consisted of the following:
|  | Year ended December 31, |
|  | 2018 |  |  | 2017 |
Domestic |  | $ | (7,751 | ) |  | $ | (12,630 | )
Foreign |  |  | (2,496 | ) |  |  | (3,263 | )
Total |  | $ | (10,247 | ) |  | $ | (15,893 | )
The Company’s (provision) for income taxes consisted of the following:
|  | Year ended December 31, |
|  | 2018 |  |  | 2017 |
Current: |  |  |  |  |  |  |  |
Federal |  | $ | (71 | ) |  | $ | 577 |
State |  |  | 37 |  |  |  | (66 | )
Foreign |  |  | 117 |  |  |  | (682 | )
Total current |  |  | 83 |  |  |  | (171 | )
Deferred: |  |  |  |  |  |  |  |
Federal |  |  | 2,233 |  |  |  | 1,497 |
State |  |  | 667 |  |  |  | 480 |
Foreign |  |  | 495 |  |  |  | 748 |
Total |  |  | 3,395 |  |  |  | 2,725 |
Change in valuation allowance |  |  | (9,918 | ) |  |  | (833 | )
Total deferred |  |  | (6,523 | ) |  |  | 1,892 |
Benefit/(provision) for income taxes |  | $ | (6,440 | ) |  | $ | 1,721 |
The income tax benefit (provision) differs from that computed at the federal statutory corporate income tax rate as follows:
|  | Year ended December 31, |
|  | 2018 |  |  | 2017 |
Tax benefit (provision) at federal statutory rate |  | $ | 2,152 |  |  | $ | 5,403 |
State income tax benefit (provision), net of federal benefit |  |  | 413 |  |  |  | 439 |
Research and development tax credits |  |  | 250 |  |  |  | 411 |
Subpart F inclusion |  |  | — |  |  |  | (370 | )
Foreign earnings or losses taxed at different rates |  |  | 12 |  |  |  | (540 | )
Tax rate change |  |  | 23 |  |  |  | (3,161 | )
Other |  |  | 628 |  |  |  | 372 |
Change in valuation allowance |  |  | (9,918 | ) |  |  | (833 | )
Tax benefit (provision) |  | $ | (6,440 | ) |  | $ | 1,721 |
The tax effects of significant temporary differences representing net deferred tax assets and liabilities consisted of the following:
|  | 2018 |  |  | 2017 |
Deferred revenue |  | $ | 50 |  |  | $ | 738 |
Basis difference in intangible assets |  |  | 3,283 |  |  |  | 3,403 |
Inventory reserve |  |  | 2,235 |  |  |  | 2,089 |
Net operating loss carryforwards |  |  | 4,067 |  |  |  | 1,627 |
Research and development tax credits |  |  | 794 |  |  |  | 163 |
Accrued expenses |  |  | 143 |  |  |  | 75 |
Stock-based compensation |  |  | 362 |  |  |  | 327 |
Allowance for sales returns and doubtful accounts |  |  | 160 |  |  |  | 119 |
Difference in property and equipment basis |  |  | (185 | ) |  |  | (212 | )
Other |  |  | 551 |  |  |  | 438 |
Total net deferred income tax asset |  |  | 11,460 |  |  |  | 8,767 |
Less: Valuation allowance |  |  | (11,460 | ) |  |  | (2,236 | )
Net deferred income tax asset (liability) |  | $ | — |  |  | $ | 6,531 |
The Company has not provided for foreign withholding taxes on undistributed earnings of its non-U.S. subsidiaries since these earnings are intended to be reinvested indefinitely, in accordance with guidelines contained in ASC Topic 740, Accounting for Income Taxes . It is not practical to estimate the amount of additional taxes that might be payable on such undistributed earnings. The Company routinely evaluates the likelihood of realizing the benefit of its deferred tax assets and may record a valuation allowance if, based on all available evidence, it determines that it is more likely than not some portion of the tax benefit will not be realized. As of December 31, 2018, the Company had an aggregate of approximately $11.5 million in deferred tax assets primarily related to intangible assets, net operating losses, tax credit carryforwards, and inventory basis differences. On a quarterly basis, the Company tests the value of deferred tax assets for impairment at the taxpaying-component level within each tax jurisdiction. Significant judgment and estimates are required in determining whether valuation allowances should be established as well as the amount of such allowances. When making such determination, consideration is given to, among other things, the following:
| ● | sufficient taxable income within the allowed carryback or carryforward periods;
| ● | future reversals of existing taxable temporary differences, including any tax planning strategies that could be utilized;
| ● | nature or character (e.g., ordinary vs. capital) of the deferred tax assets and liabilities; and
| ● | future taxable income exclusive of reversing temporary differences and carryforwards.
Based on the foregoing criteria, the Company determined that it no longer meets the “more likely than not” threshold that net operating losses, tax credits and other deferred tax assets will be realized. Accordingly, the Company recorded a full valuation allowance at September 30, 2018, and continues to be in a full valuation allowance position at December 31, 2018. The Company has federal and state net operating loss (“NOL”) carryforwards of approximately $ 8.4 million (pre-tax), and Spain NOL carryforwards of approximately $7.5 million. The majority of the federal NOL carryforward and the Spain NOL carryforward do not expire. The state NOL carryforwards expire over various periods. Effective July 1, 2007, the Company adopted the accounting standards related to uncertain tax positions. This standard requires that tax positions be assessed using a two -step process. A tax position is recognized if it meets a “more likely than not” threshold, and is measured at the largest amount of benefit that is greater than 50 percent likely of being realized. Uncertain tax positions must be reviewed at each balance sheet date. Liabilities recorded as a result of this analysis must generally be recorded separately from any current or deferred income tax accounts. The total amount of unrecognized tax benefits at December 31, 2018 and 2017, that would favorably impact our effective tax rate if recognized was $679 and $647, respectively. As of December 31, 2018 and 2017, we accrued $15 and $14, respectively, in interest and penalties related to unrecognized tax benefits. We account for interest expense and penalties for unrecognized tax benefits as part of our income tax provision. Although we believe our estimates are reasonable, we can make no assurance that the final tax outcome of these matters will not be different from that which we have reflected in our historical income tax provisions and accruals. Such difference could have a material impact on our income tax provision and operating results in the period in which we make such determination. A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax positions is as follows:
|  | Year ended December 31, |
|  | 2018 |  |  | 2017 |
Balance - beginning of year |  | $ | 652 |  |  | $ | 1,189 |
Additions based on tax positions related to the current year |  |  | 58 |  |  |  | 67 |
Additions for tax positions of prior years |  |  | 118 |  |  |  | 520 |
Reductions for tax positions of prior years |  |  | (53 | ) |  |  | - |
Settlements |  |  | - |  |  |  | (165 | )
Lapse in statutes of limitations |  |  | (96 | ) |  |  | (959 | )
Uncertain tax positions, ending balance |  | $ | 679 |  |  | $ | 652 |
The Company’s U.S. federal income tax returns for 2015 through 2018 are subject to examination. The Company also files in various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to federal, state, or non-U.S. income tax examinations by tax authorities for years prior to 2015. The Company completed its audit by the Internal Revenue Service (“IRS”) for its 2012 and 2013 tax returns in 2017. As a result of the audit by the IRS, there were no material adjustments made to the Company’s tax return. The Inland Revenue Department of Hong Kong, a Special Administrative Region (the “IRD”), commenced an examination of the Company’s Hong Kong profits tax returns for 2009 through 2011 in the fourth quarter of 2012, which was completed subsequent to December 31, 2017. As a result of the audit, there were no material changes to the Company’s financial position. During the next twelve months, it is reasonably possible that the amount of the Company’s unrecognized income tax benefits could change significantly. These changes could be the result of our ongoing tax audits or the settlement of outstanding audit issues. However, due to the issues being examined, at the current time, an estimate of the range of reasonably possible outcomes cannot be made, beyond amounts currently accrued.

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- 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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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