(8)  INCOME TAXES

 

 

		2017			2016
Current tax (benefit) expense:
Federal		$	119		$	15
State			10			—
Foreign			—			—
Total tax (Benefit) expense:			129			15
Deferred tax (benefit) expense:
Federal			—			—
State			—			—
Foreign			—			—
Total Deferred tax (benefit) expense:		$	129		$	15

 

A reconciliation of income tax computed at the U.S. statutory rate of 34% to the effective income tax rate is as follows:

  

		2017			2016
Statutory rate			34	%		34	%
State taxes			3			3
Permanent differences and other			0			2
Change in valuation allowance			(54)			708
Other (true – up)			7			(729)
Rate Adjustment			12			—
Effective rate			2	%		18	%

 

The tax effects of temporary differences that give rise to deferred tax assets (liabilities) at December 31, 2017 and 2016 are as follows ( in thousands) :

 

		2017			2016
Long-term deferred tax assets (liabilities):
Accrued expenses		$	25		$	51
Deferred Revenue			217			322
Accounts receivable			19			907
Prepaid Expenses			(9)			(15)
Inventory			92			20
Stock based compensation			137			108
Tax Credits and NOL Carryforward			1,141			4,314
Other			6			9
Property and equipment			35			(115)
Amortization			64			105
Tax Credits and NOL Carryforward
			1,727			5,706
Less: Valuation allowance			(1,727)			(5,706)
Net deferred tax assets (liabilities)		$	-		$	-

 

 

As of December 31, 2017 and 2016, the Company has a valuation allowance of approximately $1.8 million and $5.7 million, respectively. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers past history, the scheduled reversal of deferred tax liabilities, available taxes in carryback periods, projected future taxable income projections and tax planning strategies in making this assessment. The Company has generated taxable income in 2017 and projects income in future periods. Based on these factors, the Company is currently evaluating the realization of its deferred tax assets and may have an adjustment to its valuation allowance in the future.

 

The accounting standard related to income taxes applies to all tax positions and defines the confidence level that a tax position must meet in order to be recognized in the financial statements. The accounting standard requires that the tax effects of a position be recognized only if it is "more-likely-than-not" to be sustained by the taxing authority as of the reporting date. If a tax position is not considered "more-likely-than-not" to be sustained, then no benefits of the position are to be recognized. Differences between financial and tax reporting which do not meet this threshold are required to be recorded as unrecognized tax benefits.  This standard also provides guidance on the presentation of tax matters and the recognition of potential IRS interest and penalties. As of December 31, 2017 and 2016, the Company does not have an unrecognized tax liability.

 

The Company classifies penalty and interest expense related to income tax liabilities as an income tax expense. The Company did not incur any interest and penalties for the fiscal year ended December 31, 2017 and 2016.

 

The Company files income tax returns in the U.S. and various state jurisdictions, and there are open statutes of limitations for taxing authorities to audit our tax returns from 2010 through the current period.