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INCOME TAXES (Tables)
 12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income before income taxes
The components of the Company’s income before income taxes are attributable to the following jurisdictions for the years ended December 31 (in thousands):

 
2017
 
2016
United States
$
(6,911
)
 
$
(2,368
)
Foreign
9,371

 
1,413

 
$
2,460

 
$
(955
)
Income tax provision
The components of the Company’s income tax expense for the years ended December 31 (in thousands):


Current provision (benefit):
2017
 
2016
Federal
$
(1,157
)
 
$
(396
)
State
75

 
59

Foreign
3,186

 
1,438

 
2,104

 
1,101

Deferred provision (benefit):
 
 
 
Federal
1,185

 
(95
)
State
(425
)
 
(25
)
Foreign
1,383

 
(1,350
)
 
2,143

 
(1,470
)
 
$
4,247

 
$
(369
)
Reconciliation of effective income tax rate and United States federal statutory income tax rate
A reconciliation of the Company’s effective income tax rate and the United States federal statutory income tax rate is summarized as follows, for the years ended December 31:

 
2017
 
2016
Federal statutory income taxes
35.0
 %
 
35.0
 %
State income taxes, net of federal benefit
(8.0
)
 
(4.1
)
Difference in foreign and United States tax on foreign operations
(68.6
)
 
9.5

Effect of changes in valuation allowance
121.1

 
59.0

Effect of change in uncertain tax positions (net)
(22.6
)
 
12.8

Federal Sub-Part F Income from foreign operations
6.6

 
(27.4
)
Federal Transition Tax (net of deduction)
191.4

 
—

Effect of changes in tax rates
32.5

 
—

Foreign Exchange
9.4

 
(45.7
)
Prior year adjustments
17.4

 
—

Other deferred - NOL expiration
26.0

 
—

Foreign tax credits and withholding tax
(180.8
)
 
—

Meals and entertainment
5.5

 
—

Other permanent items
4.4

 
—

Other
3.4

 
(0.4
)
 
172.7
 %
 
38.7
 %
Deferred tax assets and liabilities
Significant components of the Company’s deferred tax assets and liabilities consisted of the following at December 31 (in thousands):

Deferred tax assets:
2017
 
2016
Deferred revenue
$
353

 
$
492

Inventory capitalization
147

 
258

Inventory reserves
112

 
82

Accrued expenses
917

 
799

Depreciation and amortization
1,506

 
2,181

Net operating loss(1)
6,549

 
6,021

Deferred royalty
5

 
18

Non-cash accounting charges related to stock options and warrants
464

 
715

Foreign tax credit carryover
5,544

 
3,797

Other
360

 
932

Total deferred tax assets
$
15,957

 
$
15,295

Valuation allowance
(11,436
)
 
(8,458
)
Total deferred tax assets, net of valuation allowance
$
4,521

 
$
6,837

Deferred tax liabilities:
 

 
 

Prepaid expenses
$
239

 
$
380

Deferred commissions
543

 
742

Internally-developed software
381

 
205

Fixed assets
266

 
178

Total deferred tax liabilities
$
1,429

 
$
1,505

 
 
 
 
Total net deferred tax asset
$
3,092

 
$
5,332

 
 
 
 


(1) The Company’s net operating loss will expire as follows (dollar amounts in thousands):
Jurisdiction
Gross NOL
 
Tax Effected NOL
 
Expiration Years
Canada
$
9

 
$
2

 
2026
Colombia
$
1,641

 
$
558

 
Indefinite
Cyprus
$
8

 
$
1

 
2021
Denmark
$
9

 
$
2

 
Indefinite
Hong Kong
$
110

 
$
18

 
Indefinite
Japan
$
400

 
$
139

 
Indefinite
Mexico
$
9,395

 
$
2,819

 
2020-2027
Norway
$
263

 
$
61

 
Indefinite
Russia(1)
$
49

 
$
10

 
Indefinite
Singapore
$
131

 
$
22

 
Indefinite
South Africa
$
239

 
$
67

 
Indefinite
Sweden
$
549

 
$
121

 
Indefinite
Switzerland
$
10,893

 
$
1,001

 
2018-2023
Taiwan
$
4,707

 
$
800

 
2018-2026
Ukraine(2)
$
604

 
$
109

 
Indefinite
United Kingdom
$
454

 
$
86

 
Indefinite
 
(1) 
On August 1, 2016, the Company established a legal entity in Russia.
(2) 
On March 21, 2014, the Company suspended operations in the Ukraine, but maintains the legal entity.
Net operating loss by Jurisdiction
The Company’s net operating loss will expire as follows (dollar amounts in thousands):
Jurisdiction
Gross NOL
 
Tax Effected NOL
 
Expiration Years
Canada
$
9

 
$
2

 
2026
Colombia
$
1,641

 
$
558

 
Indefinite
Cyprus
$
8

 
$
1

 
2021
Denmark
$
9

 
$
2

 
Indefinite
Hong Kong
$
110

 
$
18

 
Indefinite
Japan
$
400

 
$
139

 
Indefinite
Mexico
$
9,395

 
$
2,819

 
2020-2027
Norway
$
263

 
$
61

 
Indefinite
Russia(1)
$
49

 
$
10

 
Indefinite
Singapore
$
131

 
$
22

 
Indefinite
South Africa
$
239

 
$
67

 
Indefinite
Sweden
$
549

 
$
121

 
Indefinite
Switzerland
$
10,893

 
$
1,001

 
2018-2023
Taiwan
$
4,707

 
$
800

 
2018-2026
Ukraine(2)
$
604

 
$
109

 
Indefinite
United Kingdom
$
454

 
$
86

 
Indefinite
Summary of valuation allowance
Country
2017
 
2016
Colombia
$
0.6

 
$
0.3

Mexico
2.8

 
2.4

South Africa
0.1

 
—

Sweden
0.1

 
0.1

Switzerland
—

 
0.1

Taiwan
0.8

 
1.3

Ukraine
0.1

 
0.1

United Kingdom
0.1

 
—

United States
6.8

 
4.1

Other Jurisdictions
—

 
0.1

Total
$
11.4

 
$
8.5
Deferred tax assets (liabilities) classified in Consolidated Balance Sheets
Deferred tax assets (liabilities) are classified in the accompanying Consolidated Balance Sheets of December 31 as follows (in thousands):


 
2017
 
2016
Noncurrent deferred tax assets
$
4,239

 
$
5,368

Long-term deferred tax liabilities

(1,147
)
 
(29
)
Net deferred tax assets
$
3,092

 
$
5,339
Unrecognized tax benefits
 
2017
 
2016
Balance as of January 1
$
733

 
$
715

Additions for tax positions related to the current year
—

 
90

Additions for tax positions of prior years
—

 
54

Reductions of tax positions of prior years
(576
)
 
(126
)
Balance as of December 31
$
157

 
$
733
Tax years subject to examinations
As of December 31, 2017, the tax years that remained subject to examination by a major tax jurisdiction for the Company’s most significant subsidiaries were as follows:

Jurisdiction
Open Years
Australia
2013-2017
Canada
2013-2017
China
2016-2017
Denmark
2014-2017
Japan
2014-2017
Mexico
2013-2017
Norway
2010-2017
Republic of Korea
2011-2017
Singapore
2013-2017
South Africa
2014-2017
Sweden
2012-2017
Switzerland
2013-2017
Taiwan
2012-2017
United Kingdom
2014-2017
United States
2014-2017