XML 27 R14.htm IDEA: XBRL DOCUMENT

Note 8 - Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Note 8 - Income Taxes

NOTE 8 — Income Taxes

The Company recorded income tax expense of $3.77 million for 2017 compared to income tax benefit of $9.72 million for 2016. The 2017 income tax expense included deferred tax expense of $1.07 million and federal and state alternative minimum tax expense of $51,000. Income tax benefit for 2016 was related to the release of valuation allowance against substantially all of the Company's federal and state deferred tax assets of $9.76 million, partially offset by federal and state alternative minimum taxes of $49,000.

The Tax Cuts and Jobs Act was enacted on December 22, 2017. The Tax Act eliminates alternative minimum taxes and lowers the U.S. federal corporate income tax from 34% to 21% effective January 1, 2018. The Company remeasured its net deferred tax assets using the new Federal Tax Rate and posted a one-time reduction of $2.6 million in deferred tax assets to reflect the lower realization rate to be applied commencing in 2018.

The components of income taxes for the periods ended December 31, 2017 and 2016 are as follows:

		Years Ended December 31,
		2017				2016
Current:
Federal		$	39,200			$	37,000
State			11,800				12,200
Total Current			51,000				49,200
Deferred:
Federal			3,758,900				(8,473,500	)
State			(40,900	)			(1,291,100	)
Total Deferred			3,718,000				(9,764,600	)
Income tax (benefit) expense		$	3,769,000			$	(9,715,400	)

Reconciliation of the statutory federal income tax rate to the Company's effective tax rate:

		Years Ended December 31,
		2017				2016
Federal tax at statutory rate			34.00	%			34.00	%
State income tax rate			5.83	%			5.83	%
Remeasurement of deferred taxes			(155.41	%)			—
Release of valuation allowance			—				308.63	%
Provision for taxes			(115.58	%)			348.46	%

As of December 31, 2017, the Company did not recognize deferred tax assets relating to an excess tax benefit for stock-based compensation deduction of $2,464,000. Unrecognized deferred tax benefits will be accounted for as a credit to additional paid-in-capital when realized through a reduction in income taxes payable.

Deferred income tax reflects the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. At December 31, 2017, the Company released valuation allowance against substantially all deferred tax assets. Significant components of net deferred tax assets are as follows:

		Years Ended December 31,
Deferred tax assets:		2017				2016
Net operating loss carryforwards		$	4,777,000			$	8,111,000
Credits			806,000				755,000
Capitalized research and development costs			—				9,000
Other acquired intangibles			17,000				49,000
Accruals not currently deductible			677,000				1,343,000
Depreciation			44,000				29,000
Total deferred tax assets			6,321,000				10,296,000
Valuation allowance for deferred tax assets			(506,000	)			(464,000	)
Net deferred tax assets			5,815,000				9,832,000
Deferred tax liability:
Acquired intangibles			(178,000	)			(243,000	)
Net deferred tax assets		$	5,637,000			$	9,589,000

As of December 31, 2017, the Company had net operating loss carryforwards for federal income tax purposes of approximately $21,316,000 which will expire at various dates beginning in 2023 and through 2033, and federal research and development tax credits of approximately $506,000, which will expire at various dates beginning in 2018 and through 2037. As of December 31, 2017, the Company had net operating loss carryforwards for state income tax purposes of approximately $11,716,000, which will expire at various dates in 2029 and through 2033, and state research and development tax credits of approximately $301,000, which can be carried forward indefinitely.

The Company has determined that utilization of existing net operating losses against future taxable income is not limited by Section 382 of the Internal Revenue Code. Future ownership changes, however, may limit the Company’s ability to fully utilize its existing net operating loss carryforwards against any future taxable income.

A reconciliation of the beginning and ending amount of unrecognized tax benefits (“UTBs”), excluding interest and penalties, is as follows:

		Amount
Beginning balance at January 1, 2017		$	755,000
Decreases in UTBs taken in prior years			—
Decreases in UTBs taken in current years			53,000
Ending balance at December 31, 2017		$	808,000

It is the Company's policy to include interest and penalties related to tax positions as a component of income tax expense. No interest was accrued for the period ended December 31, 2017. The Company estimates that the unrecognized tax benefit will not change significantly within the next twelve months.

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Company is not currently under audit in any of its jurisdictions where income tax returns are filed.