Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Schedule of Income before Income Tax, Domestic and Foreign

The consolidated income before income taxes, by domestic and foreign sources, is as follows:

(in thousands)	Years ended December 31,
	2017		2016
Domestic	$	1,580	$	2,873
Foreign		(1,176)		(1,101)
Total	$	404	$	1,772

Schedule of Components of Income Tax Expense (Benefit)

The (benefit) provision for income taxes is as follows:

(in thousands)	Years ended December 31,
	2017		2016
Current:
Federal	$	459	$	-
State		47		6
Foreign		19		221
Subtotal		525		227

Deferred:
Federal		(4,694)		127
State		(942)		19
Foreign		131		(23)
Subtotal		(5,505)		123
Total	$	(4,980)	$	350

Schedule of Effective Income Tax Rate Reconciliation

The effective income tax rate for the years ended December 31, 2017 and 2016 differed from the statutory federal income tax rate as presented below:

	Effective Tax Rate Percentage (%)
	Years ended December 31,
	2017	2016
Statutory federal income tax rate	34.0%	34.0%
State income taxes, net of federal tax benefit	(184.9)%	1.3%
Effect of foreign operations	55.6%	8.6%
Change in valuation allowance	(2,045.3)%	(46.9)%
Change in tax rate	619.1%	0.0%
Uncertain tax positions	338.6%	11.8%
Worthless stock deduction	(257.6%)	0.0%
Stock-based compensation	(51.7)%	0.2%
Transfer pricing adjustments	117.5%	(0.4)%
162(m) limit on compensation	52.3%	4.1%
Change in APB 23 liability	46.2%	0.0%
Meals and entertainment	37.8%	7.7%
Other permanent differences	5.7%	(0.6)%
Effective tax rate	(1,232.7)%	19.8%

The difference between the effective rate and statutory rate in 2017 primarily resulted from the release of valuation allowance and change in the statutory tax rate from 34% to 21%, effective for tax years beginning after December 31, 2017 due to the Tax Cuts and Jobs Act.

Schedule of Deferred Tax Assets and Liabilities

Deferred income taxes arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements. A summary of the tax effect of the significant components of the deferred income tax assets and liabilities is as follows:

(in thousands)	As of December 31,
	2017		2016
Deferred tax assets:
Net operating loss carryforwards	$	5,009	$	7,868
Capital loss carryforwards		383		549
Accruals		487		183
Reserves		514		514
Alternative minimum tax credit carryforwards		299		203
Stock-based compensation expense		1,002		1,224
Intangibles		433		391
Undistributed earnings of foreign subsidiary		-		37
Other		135		71
Total deferred tax asset		8,262		11,040
Valuation allowance		(1,095)		(10,477)
Total deferred tax asset less valuation allowance		7,167		563

Deferred tax liabilities:
Undistributed earnings of foreign subsidiary		(149)		-
Software development costs		(188)		(382)
Fixed Assets		(91)		(161)
Indefinite-lived intangibles		(337)		(316)
Other		(45)		(27)
Total deferred tax liability		(810)		(886)

Net deferred tax asset	$	6,357	$	(323)

Deferred tax liabilities are included in "Other liabilities" on the consolidated balance sheet.

Summary of Income Tax Contingencies

The following table outlines the Company's foreign uncertain tax liabilities, including accrued interest and penalties for each jurisdiction:

	China				Ukraine				South Korea					U.S.
(in thousands)	Tax		Interest and Penalties		Tax		Interest and Penalties		Tax		Interest and Penalties			Tax	Total

Balance, January 1, 2016	$	225	$	152	$	21	$	15	$	-	$	-	$	-	$	413
Increases		-		57		68		13		129		8		-		275
Decreases		23		-		-		-		-		-		-		23
Balance, December 31, 2016	$	202	$	209	$	89	$	28	$	129	$	8	$	-	$	665
Increases		14		53		11		-		212		37		833		1,160
Decreases		-		-		-		-		-		-		-		-
Balance, December 31, 2017	$	216	$	262	$	100	$	28	$	341	$	45	$	833	$	1,825