
8.	INCOME TAXES

The components of income (loss) before income taxes were as follows (in thousands):


	Years Ended December 31,

	2012			2011			2010

Income (loss) before income taxes:
Domestic	$	(136	)	$	(6,761	)	$	2,789
Foreign		(3,396	)		(6,278	)		1,126

Total	$	(3,532	)	$	(13,039	)	$	3,915

The components of income tax expense (benefit) are as follows (in thousands):


	Years Ended December 31,

	2012			2011			2010

Current:
Federal	$	(48	)	$	279		$	983
State		(1	)		4			(65	)
Foreign		90			315			25

		41			598			943

Deferred:
Federal		(31	)		(2,358	)		(32	)
State		—			(35	)		(1	)
Foreign		(190	)		(1,227	)		—

		(221	)		(3,620	)		(33	)

Total income tax expense (benefit)	$	(180	)	$	(3,022	)	$	910

A reconciliation from the federal statutory income tax provision to our effective tax expense (benefit) is as follows (in thousands):


	Years Ended December 31,

	2012			2011			2010


United States federal tax statutory rate	$	(1,201	)	$	(4,433	)	$	1,331
State taxes, net of federal benefit		3			(36	)		(47	)
Goodwill impairment		417			1,299			—
Research and development tax credits		(135	)		(412	)		(454	)
Non-deductible acquisition expenses and earn-out		—			(155	)		238
Domestic production activities deduction		(2	)		(38	)		(111	)
Foreign provision different than U.S. tax rate		545			641			(43	)
Valuation allowances against deferred tax assets		90			121			(55	)
Stock option expense		(27	)		82			75
Adjustment of prior year tax credits and refunds		69			50			(64	)
Uncertain tax positions		(19	)		(138	)		(33	)
Other		80			(3	)		73

	$	(180	)	$	(3,022	)	$	910

A summary of the deferred tax assets and liabilities is as follows (in thousands):


	December 31,

	2012			2011

Current deferred tax assets (liabilities):
Accrued compensation and benefits	$	42		$	59
Prepaid expenses and other		(31	)		(22	)
Inventory reserves		21			169
Allowance for doubtful accounts		115			119
Warranty reserves		39			104

Total current deferred tax asset		186			429

Non-current deferred tax assets (liabilities):
Intangible and other assets		3,617			2,089
Foreign net operating loss carryforwards		280			991
Non-qualified stock option expense		63			192
Property, equipment and other		96			35

Non-current deferred tax asset (liability):		4,056			3,307

Less: valuation allowance		(280	)		(176	)

Non-current deferred tax asset (liability), net		3,776			3,131


Total net deferred tax asset (liability)	$	3,962		$	3,560

As of December 31, 2012, certain subsidiaries in the United Kingdom and Hong Kong had net operating loss carryovers of $834,000 and $745,000, respectively. These net operating loss carryovers will not expire under local tax law. We determined that the benefit of these United Kingdom and Hong Kong subsidiaries' net operating loss carryovers are uncertain. Accordingly, as of December 31, 2012, we had a full valuation allowance against those deferred tax assets in the amount of $280,000.

In accordance with Accounting Standards Codification ("ASC") 740-30, we have not recognized a deferred tax liability for the undistributed earnings of certain of our foreign operations because those subsidiaries have invested or will invest the undistributed earnings indefinitely. At December 31, 2012, undistributed earnings were approximately $4,136,000. It is impractical for us to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings. Deferred taxes are recorded for earnings of foreign operations when we determine that such earnings are no longer indefinitely reinvested.

We realize an income tax benefit from the exercise or early disposition of certain stock options. This benefit results in a decrease in current income taxes payable and an increase in additional paid-in capital.

A reconciliation of the beginning and ending amount of the tax liability for uncertain tax positions is as follows (in thousands):


Balance at December 31, 2010	$	175
Additions for current year tax positions		—
Reductions as a result of lapses in statute of limitations		(139	)

Balance at December 31, 2011		36

Additions for current year tax positions		—
Reductions as a result of lapses in statute of limitations		(18	)

Balance at December 31, 2012	$	18

Included in the balance of uncertain tax positions at December 31, 2012 are immaterial potential benefits that, if recognized, would affect the effective tax rate. The amount of unrecognized tax benefits are not expected to change materially within the next 12 months. At December 31, 2012 and December 31, 2011, we had no accrued interest related to uncertain income tax positions. At December 31, 2012 and December 31, 2011, no accrual for penalties related to uncertain tax positions existed. Interest and penalties related to uncertain tax positions are included in interest expense and general and administrative expense, respectively, on the Consolidated Statements of Operations.

We are subject to income taxes in the U.S. federal jurisdiction and various state and foreign jurisdictions. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and require significant judgment to apply. Generally, we are subject to U.S. federal, state, local and foreign tax examinations by taxing authorities for years after the fiscal year ended December 31, 2008.

At December 31, 2012 and December 31, 2011, certain of our foreign subsidiaries were expected to receive income tax refunds within the next fiscal year. As a result, at December 31, 2012 and December 31, 2011, we recognized a current income tax receivable of $452,000 and $488,000, respectively, which is included in Prepaid Expenses and Other Current Assets on the Consolidated Balance Sheets.