Note

Income Taxes

The following table summarizes the income tax (expense) benefit for the years ended

December 31, 2017

and

2016

(in thousands):

	2017			2016
Current:
Federal	$	-		$	-
State		(149	)		(177	)
Foreign		(213	)		(119	)
Current Total		(362	)		(296	)
Deferred:
Federal		994			(380	)
State		52			(119	)
Foreign		-			(20	)
Deferred Total		1,046			(519	)
Total	$	684		$	(815	)

The income tax benefit (expense) differs from the amount computed by applying the statutory federal and state income tax rates to the net income before income tax. The following table shows the reasons for these differences (in thousands):

	2017			2016
Computed income tax benefit (expense) at statutory rate	$	180		$	(319	)
Increase in taxes resulting from:
Permanent and other deductions, net		(95	)		(94	)
Forfeiture of stock options, net		-			(164	)
Foreign income taxes		(32	)		(71	)
State income taxes, net of federal benefit		(62	)		(167	)
Deferred tax effects		693			-
Total income tax benefit (expense)	$	684		$	(815	)

The following table shows the tax effect of significant temporary differences, which comprise the deferred tax asset and liability (in thousands):

	2017			2016
Deferred tax asset:
Net operating loss carryforward	$	395		$	506
Foreign tax credits		380			261
Accrued expenses		578			959
Allowance for doubtful accounts		173			209
Stock-based compensation		242			138
Other intangible assets		54			104
Total deferred income tax asset		1,822			2,177
Deferred tax liability:
Property and equipment		(589	)		(990	)
Intangible assets-brand name		(1,079	)		(1,798	)
Goodwill		(447	)		(661	)
Other intangible assets		(229	)		(295	)
Total deferred income tax liability		(2,344	)		(3,744	)
Net deferred tax liability	$	(522	)	$	(1,567	)

The Company has

$1.9

million of federal net operating loss carryforwards, which expire during

2036

and

2037.

Additionally, the Company has

$0.4

million of U.S. federal foreign tax credit carryforwards, which expire between

2023

and

2027.

The U.S. Tax Cuts and Jobs Act (Tax Act) was enacted on

December 22, 2017

and introduces significant changes to U.S. income tax law. Effective in

2018,

the Tax Act reduces the U.S. statutory tax rate from

35%

21%

and creates new taxes on certain foreign-sourced earnings and certain related-party payments, which are referred to as the global intangible low-taxed income tax and base erosion tax, respectively. In addition, in

2017

we are subject to a

one

-time transition tax on accumulated foreign subsidiary earnings

not

previously subject to U.S. income tax. We estimate that the Company’s deemed repatriation liability will

not

be material due to a foreign deficit.

Due to the timing of the enactment and the complexity involved in applying the provisions of the Tax Act, we have made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of

December 31, 2017.

As we collect and prepare necessary data, and interpret the Tax Act and any additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies, we

may

make adjustments to the provisional amounts. Those adjustments

may

materially impact our provision for income taxes and effective tax rate in the period in which the adjustments are made. The accounting for the tax effects of the Tax Act is expected to be completed in

2018.

Provisional amounts for the following income tax effects of the Tax Act have been recorded as of

December 31, 2017

and are subject to change during

2018.

One-time transition tax

The Tax Act requires us to pay U.S. income taxes on accumulated foreign subsidiary earnings

not

previously subject to the U.S. income tax at a rate of

15.5%

to the extent of foreign cash and certain other net current assets and

on the remaining earnings. We did

not

record a provisional amount for this

one

-time transitional tax liability as our foreign subsidiaries had a net foreign earnings and profit deficit as of

December 31, 2017.

Deferred tax effects

The Tax Act reduces the U.S. statutory tax rate from

35%

21%

for years after

2017.

Accordingly, we have remeasured our deferred taxes as of

December 31, 2017

to reflect the reduced rate that will apply in future periods when these deferred taxes are settled or realized. We recognized a deferred tax benefit of

$0.7

million to reflect the reduced U.S. tax rate and other effects of the Tax Act. Although the tax rate reduction is known, we have

not

collected the necessary data to complete our analysis of the effect of the Tax Act on the underlying deferred taxes and as such, the amounts recorded as of

December 31, 2017

are provisional.