Note 14 – Income Taxes

The following summarizes the provision (benefit) for income taxes:

	2015		2014
Current:
Federal		-		-
State and local		12		-
	$	12	$	-
Deferred:
Federal		(2,023)		(62)
State and local		(288)		216
		(2,311)		154
Valuation allowance		2,345		(123)
Provision for income taxes	$	46	$	31

The provision (benefit) for income taxes differs from the amounts computed by applying the applicable Federal statutory rates due to the following:

	2015		2014
Provision (benefit) for Federal income taxes at the statutory rate	$	(2,286)	$	(296)
State and local income taxes, net of Federal benefit		(379)		(28)
Permanent differences:
Stock compensation		73		83
Other		23		23
Net operating loss true up		-		209
Change in valuation allowance		2,345		(123)
Other		270		163
Provision (benefit) for income taxes	$	46	$	31

Significant components of the Company’s deferred tax assets and liabilities are as follows:

	December 31,
	2015		2014
Deferred tax assets:
Allowance for doubtful accounts	$	95	$	71
Inventories		2,161		1,609
Intangible		162		144
Net operating loss carry forward		9,227		7,477
Other		2		2
Total deferred tax assets		11,647		9,303
Deferred tax liabilities:
Depreciation		(91)		(94)
Intangible		(8)		(6)
Indefinite life intangibles		(129)		(95)
Total deferred tax liabilities		(228)		(195)
		11,419		9,108
Valuation allowance		(11,548)		(9,203)
Net	$	(129)	$	(95)

For the years ended December 31, 2015, the Company had approximately $24,985 and $12,316 of federal and state net operating loss carryovers (“NOL"), respectively, which begin to expire in 2024.

The change in the valuation allowance for the years ended December 31, 2015 and December 31, 2014 was $2,345 and $(123), respectively.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and taxing strategies in making this assessment. The deferred tax liability related to indefinite life intangible assets cannot be used in this determination. Therefore, the deferred tax liability related to indefinite life intangibles acquired in 2012 cannot be considered when determining the ultimate realization of deferred tax assets. The decision to record this valuation allowance was based on management evaluating all positive and negative evidence. The significant negative evidence includes a loss for the current year, a cumulative pre-tax loss for the three years ended December 31, 2015, the inability to carryback the net operating losses, limited future reversals of existing temporary differences and the limited availability of tax planning strategies. The Company expects to continue to provide a full valuation allowance until, or unless, it can sustain a level of profitability that demonstrates its ability to utilize these assets.

The Company had no change in its liability for uncertain tax position during 2015 and no liabilities for uncertain tax positions as of December 31, 2015. ASC 740 discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties incurred in connection with income taxes as a component of income tax expense. No interest or penalties were recorded during the years ended December 31, 2015 and 2014.

The Company is required to file U.S. federal and state income tax returns. These returns are subject to audit by tax authorities beginning with the year ended December 31, 2012.