Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Before Income Taxes by Domestic and Foreign Sources

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

(in thousands)	Years ended December 31,
	2018			2017
Domestic	$	2,512		$	1,580
Foreign		(1,735	)		(1,176	)
Total	$	777		$	404

Provision (Benefit) For Income Taxes

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

(in thousands)	Years ended December 31,
	2018			2017
Current:
Federal	$	(6	)	$	459
State		259			47
Foreign		234			19
Subtotal		487			525

Deferred:
Federal		600			(5,867	)
State		67			(942	)
Foreign		(23	)		131
Subtotal		644			(6,678	)
Total	$	1,131		$	(6,153	)

Effective Income Tax Rate Reconciliation

The effective income tax rate for the years ended December 31, 2018 and 2017 differed from the statutory federal income tax rate as presented below:

	Effective Tax Rate Percentage (%)
	Years ended December 31,
	2018	2017
Statutory federal income tax rate	21.0%	34.0%
State income taxes, net of federal tax benefit	30.1%	(184.7)%
Effect of foreign operations	(2.1)%	55.4%
Change in valuation allowance	(43.6)%	(2,332.0)%
Meals and Entertainment	10.0%	37.9%
Stock based compensation	(6.9)%	(81.7)%
162(m) Limit on compensation	0.0%	52.2%
Subpart F Income	0.0%	3.0%
Other permanent differences	0.4%	0.2%
Uncertain Tax Positions	46.3%	338.1%
Change in tax rate	(2.8)%	618.1%
Worthless stock deduction	0.0%	(257.0)%
Expired stock options	50.7%	30.2%
Change in APB 23	(4.4)%	46.0%
Prior year reconciling items	(2.4)%	117.3%
Expiration of capital Loss	49.3%	0.0%
Effective tax rate	145.6%	(1,523.0)%

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,
	2018			2017
Deferred tax assets:
Net operating loss carryforwards	$	4,074		$	5,009
Capital loss carryforwards		-			383
Accruals		760			487
Reserves		479			514
Alternative minimum tax credit carryforwards		213			299
Stock-based compensation expense		563			1,002
Intangibles		674			433
Undistributed earnings of foreign subsidiary		-			-
Other		324			135
Total deferred tax asset		7,087			8,262
Valuation allowance		(756	)		(1,095	)
Total deferred tax asset less valuation allowance		6,331			7,167

Deferred tax liabilities:
Undistributed earnings of foreign subsidiary		(103	)		(149	)
Software development costs		(163	)		(188	)
Fixed Assets		(44	)		(91	)
Indefinite-lived intangibles		(525	)		(337	)
Other		(138	)		(45	)
Total deferred tax liability		(973	)		(810	)

Net deferred tax asset	$	5,358		$	6,357

Uncertain Tax Liabilities

The following table outlines the Company's 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		Interest and Penalties		Total

Balance, January 1, 2017	$	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
Increases		-		23		-		44		120		66		163		4		420
Decreases		12		-		18		-		-		-		-				30
Balance, December 31, 2018	$	204	$	285	$	82	$	72	$	461	$	111	$	996	$	4	$	2,215