INCOME TAXES

12 Months Ended

Dec. 31, 2016

Income Tax Disclosure [Abstract]

INCOME TAXES

8.         INCOME TAXES

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

	Years ended December 31,
	2016		2015
Income from continuing operations before  income taxes and discontinued operations
Domestic	$	801	$	1,057
Foreign		(139)		(656)
Total	$	662	$	401

 

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

	Years ended December 31,
	2016		2015
Current:
Federal	$	-	$	-
State		2		7
Foreign		12		9
	$	14	$	16
Deferred:
Federal	$	-	$	-
State		-		-
Foreign		(39)		2
		(39)		2
Total income tax expense (benefit)	$	(25)	$	18

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

	Years ended December 31,
	2016		2015
United States federal tax statutory rate	$	225	$	137
State taxes, net of federal benefit		(52)		(6)
Valuation allowances against deferred tax assets		(58)		637
Research and development tax credits		(252)		(716)
Foreign provision different than U.S. tax rate		22		104
Stock option expense		14		21
Adjustment of prior year tax credits and refunds		174		(40)
Uncertain tax positions		-		-
Other		(98)		(119)
Total	$	(25)	$	18

 

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

	Years ended December 31,
	2016		2015
Deferred tax assets:
Accrued compensation and benefits	$	28	$	186
Inventory reserves		26		27
Allowance for doubtful accounts		5		9
Warranty reserves		367		168
Intangible and other assets		2,512		3,027
Net operating loss carryforwards		6,949		6,898
Non-qualified stock option expense		-		114
Property, equipment and other		156		133
Research and development credit		2,059		1,710
Total deferred tax asset:		12,102		12,272
Less: valuation allowance		(11,994)		(12,205)
Net deferred tax assets:		108		67
Deferred tax liabilities:
Prepaid expenses and other		(50)		(48)
Total deferred tax liability:		(50)		(48)
Total net deferred tax asset	$	58	$	19

As of December 31, 2016, the Company had sustained a significant accumulated tax loss. The net operation loss (“NOL”) carry forward in the United States, United Kingdom, Hong Kong, Canada and China is $14.8 million, $7.8 million, $1.5 million, $217,000 and $70,000, 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, 2016, a full valuation allowance is provided, except for the Canadian NOL.

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.

The Company has recognized no material uncertain tax positions as of December 31, 2016.  The Company files income tax returns in the U.S federal jurisdiction and various state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S federal or state and local income tax examinations by tax authorities for years before 2012.  It is difficult to predict the final timing and resolution of any particular uncertain tax position.  Based on the Company's assessment of many factors, including past experience and complex judgments about future events, the Company does not currently anticipate significant changes in its uncertain tax positions over the next 12 months.