Note 14 - Income Taxes

On December 22, 2017, the 2017 Tax Cut and Jobs Act (the “Act”) was enacted into law and the new legislation contains several key tax provisions, including a one-time mandatory transition tax on undistributed foreign earnings and a reduction of the corporate income tax rate to 21% effective January 1, 2018, among others. The Company is required to recognize the effect of the tax law changes in the period of enactment, such as determining the estimated transition tax, re-measuring its U.S. deferred tax assets and liabilities at a 21% rate as well as reassessing the net realizability of its deferred tax assets and liabilities. The onetime transition tax does not apply to the Company as it does not have any undistributed foreign earnings. The provisional amount related to the re-measurement of its net deferred tax balance is a reduction of approximately $4,100 with an offsetting adjustment to the valuation allowance, resulting in a benefit of $18 recorded in provision (benefit) for income taxes on the accompanying consolidated statements of operations and comprehensive income (loss).

On December 22, 2017, the SEC Staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of ASC Topic 740 in situations when a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for certain income tax effects of the Act. The Company is complete with its accounting for the effects of the Act, however, as additional guidance and interpretation may be issued by the U.S. Treasury Department, the IRS and other standard setting bodies, the Company may be required to make adjustment to the above provisional amount in 2018.

The following summarizes the provision (benefit) for income taxes for the years ended December 31, 2017 and 2016:

	2017			2016
Current:
Federal	$	-		$	-
State and local		17			19
		17			19
Deferred:
Federal		4,086			(332	)
State and local		(10	)		1,004
		4,076			672
Valuation allowance		4,111			(662	)
Provision for income taxes	$	(18	)	$	29

The provision (benefit) for income taxes differs from the amounts computed by applying the applicable Federal statutory rates due to the following for the years ended December 31, 2017 and 2016:

	2017			2016
Provision (benefit) for Federal income taxes at the statutory rate	$	(137	)	$	(396	)
State and local income taxes, net of Federal benefit		10			12
Permanent differences:
Other		147			66
Deferred tax asset true-up		-			1,007
Change in valuation allowance		(4,111	)		(662	)
Rate differential		4,078			-
Other		(5	)		2
Provision (benefit) for income taxes	$	(18	)	$	29

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
	2017			2016
Deferred tax assets:
Allowance for doubtful accounts	$	38		$	62
Inventories		746			1,673
Intangible		105			154
Share based compensation		70			68
Net operating loss carry forward		5,874			9,032
Other		1			2
Total deferred tax assets		6,834			10,991
Deferred tax liabilities:
Depreciation		(44	)		(77	)
Intangible		(4	)		(7	)
Pension liability		(12	)		(22	)
Indefinite life intangibles		(104	)		(139	)
Total deferred tax liabilities		(164	)		(245	)
		6,670			10,746
Valuation allowance		(6,774	)		(10,885	)
Net	$	(104	)	$	(139	)

For the year ended December 31, 2017, the Company had approximately $27,728 and $15,027 of federal and state net operating loss carryovers ("NOL"), respectively, which begin to expire in 2022.

The change in the valuation allowance for the years ended December 31, 2017 and December 31, 2016 was $(4,111) and $(662), respectively.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. The deferred tax liability related to indefinite life intangible assets cannot be used in this determination. Therefore, the deferred tax liability related to indefinite life intangibles acquired in 2012 cannot be considered when determining the ultimate realization of deferred tax assets. The decision to record this valuation allowance was based on management evaluating all positive and negative evidence. The significant negative evidence includes a loss for the current year, a cumulative pre-tax loss for the three years ended December 31, 2017, the inability to carryback the net operating losses, limited future reversals of existing temporary differences and the limited availability of tax planning strategies. The Company expects to continue to provide a full valuation allowance until, or unless, it can sustain a level of profitability that demonstrates its ability to utilize these assets.

The Company had no change in its liability for uncertain tax position during 2017 and no liabilities for uncertain tax positions as of December 31, 2017. ASC 740 discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties incurred in connection with income taxes as a component of income tax expense. No interest or penalties were recorded during the years ended December 31, 2017 and 2016.

The Company is required to file U.S. federal and state income tax returns. These returns are subject to audit by tax authorities beginning with the year ended December 31, 2014.