Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

The provision (benefit) for income taxes attributable to income from operations includes the following (in thousands):

	For the Years Ended December 31,
	2018			2017			2016
Current (benefit) provision
Federal	$	(29	)	$	(86	)	$	114
State		(17	)		29			28
Total current		(46	)		(57	)		142

Deferred provision (benefit)
Federal		15			(2,622	)		155
State		62			(88	)		37
Total deferred		77			(2,710	)		192
Total provision (benefit)	$	31		$	(2,767	)	$	334

Reconciliation of Effective Tax Rate

The provision for income taxes related to operations varies from the amount determined by applying the federal income tax statutory rate to the income or loss before income taxes, exclusive of net income attributable to non-controlling interest. The reconciliation of these differences is as follows:

	For the Years Ended December 31,
	2018	2017	2016
Computed expected income tax provision	21.0%	34.0%	34.0%
State income taxes, net of federal income tax benefit	(20.9)	0.9	0.8
Change in valuation allowance for deferred tax assets	47.7	(26.9)	(21.5)
Cumulative deferred adjustments	--	--	(0.3)
Provision to return adjustments	1.8	--	(0.4)
Other permanent differences	(12.2)	(1.3)	(1.8)
Dividend and accretion on preferred stock	(49.9)	(15.2)	(19.3)
FIN 48 liability	(4.6)	(0.9)	0.7
R&D credit	27.7	4.6	3.3
Impact of Tax Act	(12.5)	35.5	--
Other	--	1.5	(0.4)
	(1.9)%	32.2%	(4.9)%

Deferred Tax Assets and Liabilities

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

	December 31,
	2018			2017
Deferred tax assets:
Accounts receivable, principally due to allowance for doubtful accounts	$	79		$	108
Allowance for inventory obsolescence and amortization		281			818
Accrued liabilities not currently deductible		1,634			1,657
Accrued compensation		1,206			735
Deferred rent		4,750			5,134
Telos ID basis difference		--			65
Section 163(j) interest limitation		246			--
Net operating loss carryforwards - federal		1,956			2,453
Net operating loss carryforwards - state		653			848
Federal tax credit		983			666
Total gross deferred tax assets		11,788			12,484
Less valuation allowance		(6,652	)		(7,219	)
Total deferred tax assets, net of valuation allowance		5,136			5,265
Deferred tax liabilities:
Amortization and depreciation		(2,237	)		(2,127	)
Unbilled accounts receivable, deferred for tax purposes		(955	)		(1,282	)
Goodwill basis adjustment and amortization		(2,713	)		(2,597	)
Telos ID basis difference		(49	)		--
Total deferred tax liabilities		(5,954	)		(6,006	)
Net deferred tax liabilities	$	(818	)	$	(741	)

Components of Valuation Allowance

The components of the valuation allowance are as follows (in thousands):

	Balance Beginning of Period		Additions		Recoveries			Balance End of Period

December 31, 2018	$	7,219	$	--	$	(567	)	$	6,652
December 31, 2017	$	10,499	$	--	$	(3,280	)	$	7,219
December 31, 2016	$	9,027	$	1,472	$	--		$	10,499

Unrecognized Tax Benefits Roll Forward

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

	2018			2017			2016
Unrecognized tax benefits, beginning of period	$	677		$	762		$	803
Gross decreases — tax positions in prior period		(63	)		(127	)		(66	)
Gross increases — tax positions in current period		92			77			46
Settlements		(58	)		(35	)		(21	)
Unrecognized tax benefits, end of period	$	648		$	677		$	762