Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2018
Income Tax Disclosure [Abstract]  


  a. As of December 31, 2018, the U.S. Company had federal and state net operating loss carry forward for tax purposes of approximately $ 17,838. $3,441 of the federal net operating loss can be carried forward indefinitely and 14,397 of the federal net operating losscan be offset against taxable income for 20 years. Utilization of the U.S. net operating losses may be subject to substantial limitations in the event of a change of ownership provisions of the Internal Revenue Code of 1986.

U.S. Tax Cuts and Jobs Acts:


On December 22, 2017, the U.S. Tax Cuts and Jobs Acts was enacted into law. The new legislation contains several key tax provisions that will impact the Company. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, a one-time repatriation tax on accumulated foreign earnings, a limitation on the tax deductibility of interest expense, an acceleration of business asset expensing, and a reduction in the amount of executive pay that could qualify as a tax deduction. The lower corporate income tax rate will require the Company to remeasure its U.S. deferred tax assets as well as reassess the realizability of its deferred tax assets. ASC 740 requires the Company to recognize the effect of the tax law changes in the period of enactment. However, the SEC staff has issued SAB 118 which allowed the Company to record provisional amounts during a measurement period. 


The Company has concluded that a reasonable estimate could be developed for the effects of the tax reform. These effects, which had an immaterial effect on the taxes on income due to the valuation allowance, have been included in the consolidated financial statements for the year ended December 31, 2018.


  c. Foreign tax:


  1. Tax rates applicable to the income of the Israeli subsidiary:


    The Israeli corporate tax rate in 2018 and 2017 is 23% and 24%, respectively.


In December 2017, the Israeli Parliament approved the Economic Efficiency Law (Legislative Amendments for Applying the Economic Policy for the 2018 and 2017 Budget Years), 2017 which reduced the corporate income tax rate to 24% (instead of 25%) effective from January 1, 2017 and to 23% effective from January 1, 2018. 


  2. The subsidiary has final tax assessments through 2012.


  d. Loss before taxes on income:


      Year ended
December 31,
      2018     2017  
Domestic     $ 3,503     $ 4,930  
Foreign       779     (3 )
      $ 4,282     $ 4,927  


  e. Deferred income taxes:


Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are as follows: 


      December 31,  
      2018     2017  
Deferred tax assets:                  
Net operating loss carry forward     $ 3,746     $ 2,722  
Temporary differences       35       35  
Deferred tax assets before valuation allowance       3,781       2,757  
Valuation allowance       (3,781 )     (2,757 )
Net deferred tax asset     $     $  


For the year ended December 31, 2018, the net change in valuation allowance of $1,024 was related to the increase in valuation allowance included in the income tax provision. For the year ended December 31, 2017, the decrease in valuation allowance of $1,171 was related to the change in valuation allowance due to a $1,571 reduction due to reduced benefits from the reduction of the corporate tax rates from 35% to 21% offset by an $400 increase in valuation allowance included in the income tax provision.


In assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion of the deferred tax assets will not be realized. 


The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance at December 31, 2018 and 2017. 


  f. Reconciliation of the theoretical tax expense to the actual tax expense:


The main reconciling items between the statutory tax rate of the Company and the effective tax rate are the non-recognition of tax benefits from accumulated net operating loss carryforward among the Company and its subsidiary due to the uncertainty of the realization of such tax benefits. 


  g. A reconciliation of the beginning and ending balances of uncertain tax benefits is as follows:


      December 31,  
      2018     2017  
Balance at beginning of the year     $ 168     $ 170  
Increases related to tax positions from prior years             17  
Lapses of statutes of limitation       (168)     (19)  
Balance at the end of the year     $     $ 168  


The Company recognizes interest and penalties related to unrecognized tax benefits in tax expense. During the year ended December 31, 2018, the Company accrued $0 for interest and penalties expenses related to uncertain tax positions.