Note 5 - Income Taxes

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

5 . Income Taxes

Income tax benefit reconciled to tax calculated at statutory rates is as follows:

(In thousands)	201 8			201 7
Federal tax expense (benefit) on net income/loss at statutory rate	$	686		$	(855	)
Change in valuation allowance		(412	)		(3,419	)
Basis difference related to investment in SAVSU		––			(110	)
Return to provision		52			(1,038	)
Federal rate change true-up		––			5,421
Stock compensation		(748	)		––
Book loss in SAVSU		141			––
162(m) limitation on executive compensation deductibility		296			––
Other		(15	)		1
Benefit (expense) for income taxes, net	$	––		$	––

At

December 

31,

2018

and

2017,

the components of the Company’s deferred taxes are as follows:

(In thousands)	201 8			201 7
Deferred tax assets (liabilities)
Net operating loss carryforwards	$	7,381		$	8,162
Accrued compensation		181			32
Depreciation		(24	)		43
Section 263a inventory adjustment		42			29
Stock-based compensation		664			688
Deferred rent		101			––
Outside basis difference in SAVSU		––			(225	)
Other		––			28
Total		8,345			8,757
Less: Valuation allowance		(8,345	)		(8,757	)
Net deferred tax asset	$	––		$	––

On

December 22, 2017,

“H.R.1”,

known as the “Tax Cuts and Jobs Act”, was signed into law in the United States. Among other items,

H.R.1

reduces the federal corporate tax rate to

21%

from the existing maximum rate of

35%,

effective

January 1, 2018.

As a result, the Company revalued its net deferred tax asset at the new lower tax rate during the year ended

December 31, 2017.

The Company has reduced the value of the deferred tax asset before valuation allowance by

$5.4

million at

December 31, 2017.

Based on our estimated

2018

pre-tax income of

$2.3

million, we reduced our usable net operating loss carryforwards by

$2.3

million.

The Company has the following net operating loss tax carryforwards available at

December 

31,

2018:

(In thousands)	Year of Expiration	Net Operating Losses
	2019	$	259
	2020		2,849
	2021		4,168
	2023		1,217
	2024		646
	2025		589
	2026		873
	2027		2,607
	2028		2,512
	2029		2,196
	2030		1,232
	2031		1,028
	2032		437
	2033		37
	2034		6,409
	2035		3,093
	2036		4,995
	Total	$	35,147

Based on historical losses and potential future changes in the ownership of the Company, the utilization of such loss and tax credit carryforwards could be substantially limited.

We have recorded a full valuation allowance against our deferred tax assets. As we trend towards positive net income, we will continue to assess our valuation allowance. Based on all available evidence, we determined that we have

not

yet attained a sustained level of profitability. Therefore, we have maintained the full valuation allowance at

December 31, 2018.

We

may

release all, or a portion, of the valuation allowance in the near-term, dependent on the verifiable positive evidence observed in future years.