Note 9 - Income Taxes

12 Months Ended

Dec. 31, 2012

Income Tax Disclosure [Text Block]

9.           INCOME TAXES

The components of deferred income taxes are as follows (in thousands):

	December 31,
	2012			2011
Deferred tax assets:
Net operating loss carryforwards	$	14,491		$	16,728
Inventory		1,769			1,736
Other liabilities		3,055			2,229
Fixed assets		440			452
Other temporary differences		589			625
		20,344			21,770
Deferred tax valuation allowance		(20,344	)		(3,268	)
	$	-		$	18,502

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At December 31, 2012, the gross deferred tax asset balance was $20.3 million and includes the $14.5 million tax effect of $40.5 million in U.S. Federal net operating loss carryforwards ("NOLs") expiring between 2018 and 2032. In accordance with accounting standards the Company has not recorded a deferred tax asset of approximately $1.0 million related to the NOLs resulting from the exercise of disqualifying stock options.

Accounting standards require that the Company continually assess the likelihood that its deferred taxes will be realizable. All available evidence, both positive and negative, must be considered in determining whether it is more likely than not that the deferred tax assets will be realized. In making such assessments, significant weight is given to evidence that can be objectively verified. A company's current or previous losses are given more weight than its future outlook. Using that standard, the loss incurred in fiscal 2012 and the consecutive losses in recent preceding fiscal years was a significant negative factor. Also in 2012, approximately $7.5 million of federal net operating losses, which had been fully reserved in 2011 as they were not deemed to be realizable based on management's expectation at such time, expired unutilized. These negative factors, combined with uncertain near-term market and economic conditions, reduced the Company's ability to rely on its projections of future taxable income in determining whether a valuation allowance was required. Accordingly, the Company concluded that a full valuation allowance of $20.3 million was required.

The Company will continue to assess the likelihood that its deferred tax assets will be realizable, and its valuation will be adjusted accordingly, which could materially impact its financial position and results of operations in future periods.

The Company's income tax expense for the years ended December 31, 2012 and 2011, consisted of the following (in thousands):

	2012			2011
Current:
State and foreign	$	(38	)	$	(48	)
Deferred:
State		53			22
Federal		921			473
		974			495
Valuation allowance		(19,475	)		(2,724	)
Income tax expense	$	(18,539	)	$	(2,277	)

The effective income tax rate differed from the Federal statutory rate as follows (in thousands):

	2012						2011
	Amount			%			Amount			%
Federal income tax benefit at statutory rate	$	1,279			34.0		$	669			34.0
Permanent differences		(150	)		(4.1	)		(197	)		(10.0	)
International taxes and rate differentials and other		(193	)		(5.0	)		(25	)		(1.2	)
Effect of increase in valuation allowance for deferred tax assets		(19,475	)		(517.7	)		(2,724	)		(138.4	)
	$	(18,539	)		(492.8	)	$	(2,277	)		(115.6	)

The Company files U.S. federal income tax returns as well as income tax returns in various states and one foreign jurisdiction. It may be subject to examination by the Internal Revenue Service ("IRS") for calendar years 2009 through 2012 under the normal statute of limitations. Additionally, any net operating losses that were generated in prior years and utilized in these years may also be subject to examination by the IRS. Generally, for state tax purposes, the Company's 2008 through 2012 tax years remain open for examination by the tax authorities under a four year statute of limitations, however, certain states may keep their statute open for six to ten years.