Income Taxes

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 12: INCOME TAXES

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Act") was signed into law, making significant changes to U.S. tax law. Changes include, but are not limited to, a corporate income tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017. In accordance with the Act, the Company recorded an income tax benefit of $200 in the fourth quarter of 2017, the period in which the legislation was enacted.

The income tax provision/(benefit) consisted of the following:

	Year ended December 31,
	2019		2018
Tax provision summary:
State income tax	$	46	$	23
Deferred tax benefit - federal		17		(454	)
Deferred tax expense – state		30		33
Tax benefit	$	93	$	(398	)

The income tax provision/(benefit) includes federal and state income taxes currently payable and those deferred or prepaid because of temporary differences between financial statement and tax bases of assets and liabilities. The Company records income taxes under the liability method. Under this method, deferred income taxes are recognized for the estimated future tax effects of differences between the tax bases of assets and liabilities and their financial reporting amounts based on enacted tax laws. The amount provided for deferred income taxes reflects that impact of the revaluation of the Company's deferred income tax assets and liabilities required as the result of the change in the U.S. federal and state income tax rates, as discussed above.

A reconciliation of the statutory income tax rate to the effective income tax rates as a percentage of income before income taxes is as follows:

	2019			2018
Federal statutory rate		21.00	%		21.00	%
State taxes, net of federal benefit		9.85	%		1.36	%
Foreign rate differential		-9.69	%		0.58	%
IRC 162(m) limitation		0	%		-0.63	%
Meals and entertainment		0.81	%		0	%
Discrete items, Transaction items, and Other		44.05	%		239.77	%
Changes in valuation allowance		-57.76	%		-258.44	%
Effective tax rate		8.25	%		3.64	%

The net deferred tax assets and liabilities recognized in the accompanying consolidated balance sheets, determined using the income tax rate applicable to each period, consist of the following:

	December 31,
	2019			2018
Deferred tax assets (liabilities):
Reserves	$	175		$	233
Property and equipment		(83	)		462
Accrued expenses		265			822
Right-of-use Asset		(414	)		-
Right-of-use Liability		419			-
Severance		-			65
IRC 163(j) Interest Deduction		17			591
Non-qualified stock options		528			336
R&D credits		1,801			1,538
Net foreign carryforwards		2,768			2,214
Net operating loss and credit carryforwards		34,754			33,988
Intangibles		(1,128	)		(672	)
Total deferred tax assets, net		39,102			39,577
Valuation allowance		(39,277	)		(39,705	)
Net deferred tax liabilities	$	(175	)	$	(128	)

Our deferred tax assets are primarily related to net federal and state operating loss carryforwards (NOLs). We have substantial NOLs that are limited in its usage by IRC Section 382. IRC Section 382 generally imposes an annual limitation on the amount of NOLs that may be used to offset taxable income when a corporation has undergone significant changes in stock ownership within a statutory testing period. We have performed a preliminary analysis of the annual NOL carryforwards and limitations that are available to be used against taxable income. The estimated federal NOL carryforward after application of the IRC Section 382 limitation is $33,817 and foreign NOL carryforward is $2,768 as of December 31, 2019. Based on the history of losses of the Company, there continues to be a full valuation allowance against the net deferred tax assets of the Company with a definite life.