12. DOMESTIC AND FOREIGN INCOME TAXES

Domestic and foreign income taxes (benefits) were comprised as follows:


	Year Ended December 31
		2016		2015		2014
Current
Federal	$	62	$	-	$	-
State		13		-		-
Foreign		178		27		428
Total Current	$	253	$	27	$	428
Deferred
Federal		(26)		-		-
State		-		-		-
Foreign		(10)		(8)		-
Income Tax Expense	$	217	$	19	$	428
Income (loss) from continuing operations before income taxes and discontinued operations
Foreign		661		1,792		2,402
Domestic		(3,418)		1,309		1,415
	$	(2,757)	$	3,101	$	3,817

The following is a reconciliation of the statutory federal income tax rate to the effective tax rate based on income (loss):


	Year Ended December 31
		2016		2015		2014
Tax provision at statutory rate		34.00	%	34.00	%	34.00	%
Change in valuation allowance		(46.42)		(20.08)		(10.74)
Impact of permanent items, including stock based compensation expense		(7.93)		(21.33)		15.58
Effect of foreign tax rates		2.49		7.82		(17.14)
State taxes net of federal benefit		5.05		1.92		(3.67)
Effect of dividend of foreign subsidiary in prior year		(3.85)		5.18		3.74
Prior year provision to return true-up		10.60		(6.70)		(9.75)
Non-controlling interest		(1.77)		1.22		-
Other		(0.03)		(1.40)		(6.08)
Domestic and foreign income tax rate		(7.86)	%	0.63	%	5.94	%

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2016, and 2015 are presented below:


	Year Ended December 31
		2016		2015
Deferred tax assets:
Net operating loss carry forwards and credits	$	12,043	$	7,931
Inventory		650		563
Compensation accruals		1,447		1,273
Accruals and reserves		89		113
Credits		251		236
Other		459		212
Total Deferred tax assets		14,939		10,328
Less: valuation allowance		(13,253)		(9,810)
Deferred tax assets net of valuation allowance	$	1,686	$	518

Deferred tax liabilities
Depreciation and amortization		(1,424)		(156)
Undistributed earnings of foreign subsidiary		(194)		(319)
Total deferred tax liabilities		(1,618)		(475)
Net deferred tax	$	68	$	43

The valuation allowance is maintained against deferred tax assets which the Company has determined are more likely than not to be unrealized. The change in valuation allowance was $(3,443), $(291), and $59 for the years ended December 31, 2016, 2015 and 2014, respectively. For tax reporting purposes, the Company has actual federal and state net operating loss carryforwards of $32,019 and $15,759, respectively. These net operating loss carryforwards begin to expire in 2022 for federal tax purposes and 2017 for state tax purposes. Subsequently recognized tax benefits, if any, related to the valuation allowance for deferred tax assets or realization of net operating loss carryforwards will be reported in the consolidated statements of operations. If substantial changes in the Company’s ownership occur, there could be an annual limitation on the amount of the carryforwards that are available to be utilized.

Excluded from the Company’s net operating loss carryforwards is $438 resulting from the exercise of non-qualified stock options. Because the Company is currently in an NOL position, the windfall is not recorded through additional paid-in capital until the tax benefit is recognized through a reduction in actual tax payments.

During 2013, the Company changed its indefinite reinvestment assertion and recognized a deferred tax liability relating to cumulative undistributed earnings of controlled foreign subsidiaries in Germany. The Company has not recognized a deferred tax liability relating to cumulative undistributed earnings of controlled foreign subsidiaries in Singapore and Indonesia that are essentially permanent in duration. If some or all of the undistributed earnings of the controlled foreign subsidiaries are remitted to the Company in the future, income taxes, if any, after the application of foreign tax credits will be accrued at that time. Determination of the amount of unrecognized tax liability related to undistributed earnings in foreign subsidiaries is not currently practical.

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company regularly assesses the likelihood that the deferred tax assets will be recovered from future taxable income. The Company considers projected future taxable income and ongoing tax planning strategies, then records a valuation allowance to reduce the carrying value of the net deferred taxes to an amount that is more likely than not able to be realized. Based upon the Company’s assessment of all available evidence, including the previous three years of United States based taxable income and loss after permanent items, estimates of future profitability, and the Company’s overall prospects of future business, the Company determined that it is more likely than not that the Company will not be able to realize a portion of the deferred tax assets in the future. The Company will continue to assess the potential realization of deferred tax assets on an annual basis, or an interim basis if circumstances warrant. If the Company’s actual results and updated projections vary significantly from the projections used as a basis for this determination, the Company may need to change the valuation allowance against the gross deferred tax assets.

The Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant taxing authority. The Company has analyzed all tax positions for which the statute of limitations remains open. As a result of the assessment, the Company has not recorded any liabilities for unrecognized income tax benefits or retained earnings. The Company does not have any unrecognized tax benefits as of December 31, 2016, 2015 and 2014.

The Company recognizes penalties and interest accrued related to liability on unrecognized tax benefits in income tax expense for all periods presented. As of December 31, 2016 and 2015 the Company has no amounts accrued for the payment of interest and penalties.