TAXES AND NET OPERATING LOSS CARRYFORWARDS

12 Months Ended

Dec. 31, 2015

Notes to Financial Statements

Note 12. TAXES AND NET OPERATING LOSS CARRYFORWARDS

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. The tax effects of these temporary differences representing the components of deferred tax assets (liabilities) at December 31 were approximately as follows (in thousands):

	2015			2014
Deferred tax assets:
Loss and credit carry-forwards	$	6,578		$	5,497
Stock based compensation		283			156
Inventory Reserve		466			361
Other		273			193
Total Deferred Tax Assets		7,600			6,207
Deferred tax liabilities:
State taxes (capital)		(10	)		(9	)
Property and equipment		(413	)		(416	)
Intangibles		(337	)		(376	)
Total deferred tax liabilities		(760	)		(801	)
Total Net Deferred Tax Assets		6,840			5,406
Valuation Allowance		(7,404	)		(5,970	)
Total Net Deferred Tax Assets/(Liabilities), net of Valuation Allowance	$	(564	)	$	(564	)

We consider all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income. U.S. net operating losses will begin to expire in years beginning in 2019.

We assess the financial statement impact of an uncertain tax position taken or expected to be taken on an income tax return at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained. All of our positions arise from taxable temporary differences and, as such, the liability has been recognized in the net deferred tax asset, current and non-current items to which they relate.

Below is a reconciliation of the statutory federal income tax rate to our effective tax rate for the fiscal years ended December 31, 2015, 2014, and 2013:

	2015			2014			2013
Federal tax provision		34.0	%		34.0	%		34.0	%
State taxes (net of federal benefit)		2.4	%		1.4	%		2.6	%
Warrant gains		(11.1	)%		(18.8	)%		-	%
Valuation allowance		(26.3	)%		(45.3	)%		-	%
Other		0.6	%		(1.6	)%		(9.3)	%
		(0.4	)%		(30.3	)%		27.3	%