INCOME TAXES

12 Months Ended

Dec. 31, 2014

Income Tax Disclosure [Abstract]

INCOME TAXES

7. INCOME TAXES

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

	Years ended December 31,
	2014			2013			2012
Loss before income taxes
Domestic	$	(4,275	)	$	(9,041	)	$	(136	)
Foreign		(5,602	)		(2,923	)		(3,396	)
Total	$	(9,877	)	$	(11,964	)	$	(3,532	)

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

	Years ended December 31,
	2014			2013			2012
Current:
Federal	$	(158	)	$	(234	)	$	(48	)
State		3			(3	)		(1	)
Foreign		17			153			90
	$	(138	)	$	(84	)	$	41
Deferred:
Federal	$	—		$	4,130		$	(31	)
State		—			61			—
Foreign		(36	)		(170	)		(190	)
		(36	)		4,021			(221	)
Total income tax expense (benefit)	$	(174	)	$	3,937		$	(180	)

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

	Years ended December 31,
	2014			2013			2012
United States federal tax statutory rate	$	(3,358	)	$	(3,976	)	$	(1,201	)
State taxes, net of federal benefit		(291	)		(51	)		3
Valuation allowances against deferred tax assets		2,889			7,890			90
Research and development tax credits		(374	)		(252	)		(135	)
Foreign provision different than U.S. tax rate		831			391			545
Stock option expense		33			28			(27	)
Adjustment of prior year tax credits and refunds		125			(63	)		69
Uncertain tax positions		(10	)		(8	)		(19	)
Goodwill impairment		—			—			417
Other		(19	)		(22	)		78
Total	$	(174	)	$	3,937		$	(180	)

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

	Years ended December 31,
	2014			2013
Current deferred tax assets (liabilities):
Accrued compensation and benefits	$	141		$	66
Prepaid expenses and other		(60	)		(88	)
Inventory reserves		217			240
Allowance for doubtful accounts		112			237
Warranty reserves		194			162
Total current deferred tax asset:		604			617
Non-current deferred tax assets:
Intangible and other assets		3,476			3,525
Net operating loss carryforwards		5,620			3,320
Non-qualified stock option expense		77			47
Property, equipment and other		158			147
Research and development credit		913			378
Non-current deferred tax asset:		10,244			7,417
Less: valuation allowance		(10,950	)		(8,156	)
Non-current deferred tax liability:		(706	)		(739	)
Total net deferred tax liability	$	(102	)	$	(122	)

As of December 31, 2014, the Company had sustained a significant loss. The net operation loss (“NOL”) carry forward after considering NOL carry back in the United States, United Kingdom, Hong Kong and Canada is $11.5 million, $6.6 million, $1.5 million and $95,000, respectively. The Company’s management believes that it is not more likely than not the net operating losses will be utilized. Accordingly, as of December 31, 2014, a full valuation allowance is provided.

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. 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, 2012	$	18
Additions for current year tax positions		—
Reductions as a result of lapses in statute of limitations		(10	)
Balance at December 31, 2013	$	8
Additions for current year tax positions		—
Reductions as a result of lapses in statute of limitations		(8	)
Balance at December 31, 2014	$	—

Included in the balance of uncertain tax positions at December 31, 2014 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, 2013 and 2012, we had no accrued interest related to uncertain income tax positions. At December 31, 2013 and 2012, 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 our 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, 2010.

At December 31, 2014 and 2013, domestic and certain of our foreign subsidiaries were expected to receive income tax refunds within the next fiscal year. This current income tax receivable is included in Prepaid Expenses and Other Current Assets on our Consolidated Balance Sheets.