Income Taxes

12 Months Ended

Dec. 31, 2015

Fair estimated value of warrants

Income Taxes

The income tax provision contains the following components (in thousands):

	December 31,
	2015			2014
Current
Federal	$	66		$	84
State		(161	)		111
Foreign		76			98
Total current		(19	)		293
Deferred
Federal	$	1,307		$	(4,106	)
State		96			(558	)
Foreign		-			-
Total deferred		1,403			(4,664	)
Total	$	1,384		$	(4,371	)

Income (loss) before income taxes relating to non-U.S. operations were $(62,000) and $418,000 in the years ended December 31, 2015 and 2014, respectively.

The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income (loss) as a result of the following differences:

	December 31,
	2015			2014
Federal statutory rate	$	(113	)	$	350
Adjustments for tax effects of:
Foreign rate differential		26			(30	)
State taxes, net		(241	)		(267	)
Other nondeductible items		1,162			222
Rate change		91			(21	)
Deferred tax asset adjustment		101			(412	)
Change in valuation allowance		161			(4,213	)
Undistributed foreign earnings		197			-
	$	1,384		$	(4,371	)

Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2015			2014
Deferred tax assets:
Amortizable assets	$	1,146		$	887
Inventory		608			493
Accruals and reserves		174			499
Stock options		217			167
Net operating loss carry-forward		2,387			3,112
Credit carry-forward		581			731
Total Deferred Tax Asset		5,113			5,889
Deferred tax liabilities:
Prepaids		(71	)		(190	)
Other		(521	)		(397	)
Depreciable assets		(270	)		195
		(862	)		(392	)
Net deferred tax asset		4,250			5,497
Less valuation allowance		(1,718	)		(1,556	)
Net deferred tax liabilities	$	2,532		$	3,941

The Company has determined through consideration of all positive and negative evidence that the US federal deferred tax assets are more likely than not to be realized.  The Company does not have a valuation allowance in the US Federal tax jurisdiction.  A valuation allowance remains on certain state and foreign tax attributes that are likely to expire before realization. The change in valuation allowance increased approximately $161,000 for the year ended December 31, 2015 and decreased approximately $4,213,000 for the year ended December 31, 2014.

At December 31, 2015, the Company had approximately $1,962,000 in federal net operating loss carryforwards, which begin to expire in 2027, and approximately $21,972,000 in net operating loss carryforwards from various states. The Company had approximately $1,780,000 in net operating losses in foreign jurisdictions.

Pursuant to Internal Revenue Code ("IRC") Section 382, use of net operating loss and credit carryforwards may be limited if the Company experienced a cumulative change in ownership of greater than 50% in a moving three-year period.  Ownership changes could impact the Company's ability to utilize the net operating loss and credit carryforwards remaining at an ownership change date.  The Company has not completed a Section 382 study.

The Company has analyzed the impact of repatriating earnings from its foreign subsidiaries and has determined that the impact is immaterial.

The Company received a dividend payment from New Zealand. The Company can no longer assert indefinite reinvestment of earnings from its foreign subsidiaries. Therefore, a deferred tax liability has been recorded. The current effect of the deferred tax liability net of tax deemed paid is approximately $142,000.

The Company has accounted for uncertain tax position related to states. The Company accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of December 31, 2015 are approximately $2,000. Income tax expense as of December 31, 2015, included an increase in state income tax expense of approximately $7,000 related to uncertain tax positions.