Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2018

Disclosure Text Block [Abstract]

Note 9 - Income Taxes

Note 9 - Income Taxes

Income tax for 2018 and 2017 consisted of an expense of $21 and a benefit of $(111), respectively, of federal and state income taxes. The actual expense differs from the expected tax expense (benefit) as computed by applying the U.S. federal statutory income tax rate of 21 and 34 percent for 2018 and 2017, respectively, as follows:

	2018	2017
Income tax provision at U.S. federal statutory rate	$      791	$      466
State tax  provision, net of federal income tax	116	48
Change in valuation allowance attributable to operations	(3,114)	(25,093)
Change in effective tax rate	111	22,311
Stock compensation	30	570
True-up adjustments and expiration of tax carryforwards and credits	2,105	1,568
Other, net	(18)	19
Income tax expense (benefit)	$      21	$    (111)

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities as of December 31, 2018 and 2017 are as follows:

	2018	2017
Property and equipment, principally due to differences in depreciation	$          68	$         71
Inventory reserves and other inventory-related temporary basis differences	437	361
Warranty, vacation, deferred rent and other liabilities	251	371
Retirement liabilities	543	645
Net operating loss carryforwards	35,532	38,536
Credit carryforwards	28	27
Other	181	143
Total deferred income tax	37,040	40,154
Less valuation allowance	(37,040)	(40,154)
Net deferred income tax	$            -	$           -

Worldwide income before income taxes consisted of the following:

	2018	2017
United States	$    3,768	$    1,370
International	-	-
Total	$    3,768	$    1,370

Income tax expense (benefit) consisted of the following:

	2018	2017
Current
U.S. federal	$        (1)	$         (8)
State	22	(103)
Total current expense (benefit)	$        21	$     (111)
Deferred
U.S. federal	$  1,477	$ 23,012
State	1,637	2,081
Total	3,114	25,093
Valuation allowance increase	(3,114)	(25,093)
Total deferred expense (benefit)	-	-
Total income tax expense (benefit)	$       21	$    (111)

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.  

E&S has total federal net operating loss carryforwards of approximately $161,541 which expire from 2020 through 2036. The Company has federal minimum tax credit carryforwards of approximately $28 which do not expire. The Company has $3,400 of federal research credits that begin to expire in 2019 and $1,100 of state research credits that begin to expire in 2019. The Company has not recorded a benefit for these research credits in the financial statements because it does not meet the more-likely-than-not position recognition threshold. E&S also has state net operating loss carryforwards of approximately $34,500 that expire at various dates depending on the rules of the states to which the loss or credit is allocated.

The Company evaluates its deferred tax assets for realizability based on all of the available positive and negative evidence. Due to cumulative losses and the significance of the carryforwards, the Company determined that it is more likely than not that the deferred tax assets will not be realized. Accordingly, a valuation allowance has been established to offset the net deferred tax assets. During the years ended December 31, 2018 and 2017, the valuation allowance on deferred tax assets decreased by $3,114 and $25,093, respectively.

The Company is subject to audit by the IRS and various states for tax years dating back to 2015.  No federal or state tax returns are currently under audit. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.