Note 12 - Income Taxes

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

12.      Income Taxes

The Company’s current tax benefit was $197,000 and $184,000 for the year ended December 31, 2013 and 2012, respectively. The (benefit) from income taxes attributable to loss from continuing operations before (benefit) from income taxes for the years ended December 31, 2013 and 2012 is as follows:

	2013			2012
	(in thousands)
Current tax expense (benefit):
Federal	$	—		$	—
State and local		(197	)		(184	)
Total current tax expense (benefit)		(197	)		(184	)
Deferred tax expense
Federal		—			—
State and local		—			—
Total deferred tax expense		—			—
Total expense (benefit) from income taxes	$	(197	)	$	(184	)

The Company sold some of its New Jersey operating loss carry forwards under a program of the New Jersey Economic Development Authority (NJEDA) in exchange for net proceeds of $197,000 and $189,000 in 2013 and 2012 respectively. In order to realize these benefits, the Company must apply to the NJEDA each year and must meet various requirements for continued eligibility. In addition, the program must continue to be funded by the state of New Jersey, and there are limitations based on the level of participation by other companies. Since these specific sale transactions are subject to approval by the NJEDA, the Company recognizes the associated tax benefits in the financial statements as they are approved.

The (benefit) from income taxes differed from the amount of income taxes determined by applying the applicable federal tax rate (34%) to pretax loss from continuing operations as a result of the following:

	2013			2012
	(in thousands)
Statutory benefit	$	(95	)	$	(1,381	)
Other non-deductible expenses		2			1
Increase in federal valuation allowance		30			1,317
Sale of New Jersey net operating loss carry forward		(197	)		(189	)
Federal tax impact of state tax benefit, net		63			68
	$	(197	)	$	(184	)

Deferred tax assets included in the Consolidated Balance Sheets as of December 31, 2013 and 2012 consisted of the following:

	2013			2012
	(in thousands)			(in thousands)
Current Assets
Allowance for doubtful accounts	$	6		$	6
Inventory reserve		115			45
Other		161			151
Total Current Assets		282			202
Long Term Assets (Liabilities)
Property, plant and equipment		209			203
Deferred royalty payments		5			10
Tax operating loss carry forwards		10,672			11,101
Tax credit carry forwards		217			225
Non-employee stock options		685			625
Other		(8	)		(8	)
Total Long Term Assets (Liabilities)		11,780			12,156
Gross Deferred Tax Asset (Liability)		12,062			12,358
Less: valuation allowance		(12,062	)		(12,358	)
Deferred taxes, net	$	—		$	—

The Company evaluates the recoverability of its deferred tax assets based on its history of operating earnings, its plan to sell the benefit of certain state net operating loss carry forwards, its expectations for the future, and the expiration dates of the net operating loss carry forwards. The Company has concluded that it is more likely than not that it will be unable to realize the gross deferred tax assets in the immediate future and has established a valuation allowance for all such deferred tax assets. Accordingly, the Company has provided a valuation allowance of $12.1 million and $12.4 million for the years ended December 31, 2013 and 2012, respectively, on the deferred tax assets relating to these net operating loss carry forwards.

Operating loss and tax credit carry forwards for tax reporting purposes as of December 31, 2013 were as follows:

	(in thousands)
Federal:
Operating losses (expiring through 2032)	$	31,308
Research tax credits (expiring through 2025)		168
Alternative minimum tax credits (available without expiration)		28
State:
Net operating losses - Tennessee (expiring in 2027)		425
Alternative minimum assessment – New Jersey (available without expiration)		21

Federal net operating loss carry forwards that expire through 2032 have significant components expiring in 2020 (21%), 2029 (11%), 2030 (11%), 2031 (9%) and 2032 (12%).

The Company’s ability to use net operating loss carry forwards may be subject to substantial limitation in future periods under certain provisions of Section 382 of the Internal Revenue Code, which limit the utilization of net operating losses upon a more than 50% change in ownership of the Company’s stock that is held by 5% or greater stockholders. The Company examined the application of Section 382 with respect to an ownership change that took place during 2009 and 2010, as well as the possibility of such limitation having any material effect on the application of net operating loss carry forwards in the immediate future. The Company believes that it is likely that a change in ownership took place and that the net operating loss carry forwards will be limited.

The Company complies with ASC 740-10-25 and there was no effect on the Company’s consolidated financial position and results of operations. Accordingly, there is no interest and penalties recorded on the balance sheet for such reserves. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service and the appropriate state income taxing authorities for the tax years 2009 to 2012 due to the net loss carry forwards from those years.