NOTE 12 - INCOME TAXES

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

NOTE 12 - INCOME TAXES

Components of income (loss) before taxes:

Components of income (loss) before taxes:
	Year Ended December  31,
(in thousands)	2015		2014
U.S. operations	$	420	$	1,011
Foreign operations		502		95
Total income (loss) before taxes	$	922	$	1,106

Income tax expense (benefit) consists of:

(in thousands)	Year Ended December  31,
Current tax expense (benefit)	2015			2014
U.S. federal	$	0		$	0
State		(1	)		(4	)
Foreign		(4	)		11
		(5	)		7
Deferred tax expense (benefit) – U.S. federal		—			—
Total income tax expense (benefit)	($	5	)	$	7

A reconciliation of our effective income tax and the U.S. federal tax rate is as follows:

	Year Ended December  31,
	2015			2014
(in thousands)
Statutory tax	$	313		$	376
State and foreign income tax, net of
federal income tax benefit		(105	)		(80	)
Valuation allowance for deferred tax assets		(213	)		(289	)
Total income tax expense (benefit)	($	5	)	$	7

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets are presented below:

	Year Ended December  31,
	2015			2014
(in thousands)
Deferred income tax assets:
Allowance for doubtful accounts	$	11		$	25
Inventory and product return reserves		723			739
Compensation accruals		1,533			1,392
Accrued liabilities		311			106
Book-over-tax depreciation and amortization		99			1,018
Foreign net operating loss carryforwards		809			970
U.S. net operating loss carryforwards		6,919			6,340
U.S. credit carryforwards		1,264			1,212
		11,669			11,802
Valuation Allowance		(11,669	)		(11,802	)
Total Deferred Income Tax Assets	$	—		$	—

The valuation allowance for deferred tax assets decreased $133,000 during the year ended December 31, 2015, and decreased $239,000 during the year ended December 31, 2014.  The net deferred tax assets have a full valuation allowance provided due to uncertainty regarding our ability to utilize such assets in future years.  This full valuation allowance evaluation is based upon our volatile history of losses and the cyclical nature of our industry and capital spending.  Credit carryforwards consist primarily of research and experimental and alternative minimum tax credits with expiration years from 2020 to 2035.  U.S. net operating loss carryforwards are $20,349,000 at December 31, 2015 with expiration years from 2020 to 2035.  Utilization of net operating loss and credit carryforwards is subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended.

The gross changes in uncertain tax positions resulting in unrecognized tax benefits are presented below:

	Year Ended December  31,
	2015			2014
(in thousands)
Unrecognized tax benefits, opening balance	$	197		$	180
Prior period tax position increases		(3	)		—
Additions based on tax positions related to current year		16			17
Unrecognized tax benefits, ending balance	$	210		$	197

Historically, we have not incurred any interest or penalties associated with tax matters and no interest or penalties were recognized during 2015.  However, we have adopted a policy whereby amounts related to penalties associated with tax matters are classified as general and administrative expense when incurred and amounts related to interest associated with tax matters are classified as interest income or interest expense. 

Tax years that remain open for examination include 2012, 2013, 2014 and 2015 in the United States of America.  In addition, tax years from 2000 to 2011 may be subject to examination in the event that we utilize the net operating losses and credit carryforwards from those years in our current or future year tax returns.