Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2019

Disclosure Text Block [Abstract]

Note 9 - Income Taxes

Note 9 - Income Taxes

Income tax for 2019 and 2018 consisted of a benefit of $(138) and an expense of $21, respectively, of federal and state income taxes. The actual expense (benefit) differs from the expected tax expense (benefit) as computed by applying the U.S. federal statutory income tax rate of 21 percent for 2019 and 2018, respectively, as follows:

	2019	2018
Income tax provision (benefit) at U.S. federal statutory rate	$ (365)	$ 791
State tax  provision (benefit), net of federal income tax	(155)	116
Change in valuation allowance attributable to operations	(298)	(3,114)
Change in effective tax rate	-	111
Stock compensation	9	30
True-up adjustments and expiration of tax carryforwards and credits	685	2,105
Other, net	(14)	(18)
Income tax expense (benefit)	$ (138)	$ 21

The tax effects of temporary differences that give rise to significant portions of the deferred income tax assets and liabilities as of December 31, 2019 and 2018 are as follows:

	2019	2018
Property and equipment, principally due to differences in depreciation	$ 85	$ 68
Inventory reserves and other inventory-related temporary basis differences	437	437
Warranty, vacation, deferred rent and other liabilities	(446)	251
Retirement liabilities	504	543
Net operating loss carryforwards	35,205	35,532
Credit carryforwards	-	28
Other	956	181
Total deferred income tax	36,741	37,040
Less valuation allowance	(36,741)	(37,040)
Net deferred income tax	$ -	$ -

Worldwide income before income taxes consisted of the following:

	2019	2018
United States	$ (1,738)	$ 3,768
International	-	-
Total	$ (1,738)	$ 3,768

Income tax expense (benefit) consisted of the following:

	2019	2018
Current
U.S. federal	$ (28)	$ (1)
State	(110)	22
Total current expense (benefit)	$ (138)	$ 21
Deferred
U.S. federal	$ (297)	$ 1,477
State	595	1,637
Total	298	3,114
Valuation allowance increase	(298)	(3,114)
Total deferred expense (benefit)	-	-
Total income tax expense (benefit)	$ (138)	$ 21

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 $162,300 which begin to expire in 2020. The Company has federal minimum tax credit carryforwards of approximately $0 which do not expire. The Company has $1,600 of federal research credits that begin to expire in 2020 and $800 of state research credits that begin to expire in 2020. 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 $23,900 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 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, 2019 and 2018, the valuation allowance on deferred tax assets decreased by $298 and $3,114, respectively.

The Company is subject to audit by the IRS and various states for tax years dating back to 2016. 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.